Do you dream of retiring before age 65? If so, you need a realistic picture of your income needs, how long you will live, your purpose in retirement, and how you will control spending. If you are ten or less years from retiring, now is the time to look at these aspects of your Golden Years.
Know Your Income Needs
In 2006, the Center for Retirement Research at Boston College surveyed 400 private- sector employers. Those employers estimated that 25% of their employees lacked the financial resources to retire even at 65.
Your retirement expenses will probably be roughly 75–80% of your current expenses. So you need to determine if the income from your 401(k), 403(b), pension and other sources can generate that.
Plan for Living to Age 100
Your income streams may need to last 30, 40 or even 50 years. Any you have today may need to be supplemented or adjusted due to unforeseen needs and inflation. Additionally, you may also have to pay for health insurance if you retire before age 65.
Many new retirees live “high on the hog” for a while, only to discover they are spending more than their portfolios can earn back.
Determine Your Retirement Purpose
Early retirement is better with a plan for purposeful and meaningful living.
If you search with the right keywords, you’ll come across a number of articles about people who chose to retire late. They kept working out of passion or necessity. If that’s not you, talk to a financial planner, and they’ll help determine if you are prepared to retire. If you come to me, I’ll review your current situation in light of your goals, share my professional insights, and we'll discuss your options.
Even if your retirement savings are less than you would like, you still have lots of potential to design the life you want.
Here are some things to think about:
What do you absolutely need to accomplish?
If you could only get four or five things done in retirement, what would they be? While they may have nothing to do with money, the financial decisions you make now may be integral to achieving them.
What would revitalize you?
Some people retire with no particular goals. Others are simply burnt out. But after weeks or months of respite, ambition inevitably returns. They start to think about what pursuits or adventures they could embark on to make these years special.
Others have known for decades what dreams they will pursue, and yet, when the time to do so arrives, those dreams may unfold differently than anticipated and may even be supplanted by new ones.
You may find yourself called to volunteer more than before, or motivated to work again in a new context (perhaps part-time).
Who should you share your time with?
The quick answer to this question is usually “family.” Today, we have nuclear, blended, extended, friend and coworker families.
Regardless of how you define family and whether or not you want more “family time” when you are done working, don’t spend your time around “dream stealers” who try to thwart your dreams.
Plan Your Spending
We can’t control all of our retirement expenses, but we can control some of them:
2. Lose one or more cars (and their insurance) and live in a neighborhood with good public transit
3. Ditch landlines and premium cable TV
4. Budget for eating out, traveling, gifts and charitable contributions
If you feel you need to prepare more or reexamine your existing retirement strategy in light of recent changes in your life, conferring with a financial professional experienced in retirement approaches is a smart move.
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