ARE YOU READY TO RETIRE?
Is your retirement on course? Look at the following indicators to determine if you are well prepared to retire:
For the longest time, people presumed their cost of living will lower in retirement. Unfortunately, that is not the case. Other expenses may decline when you retire such as transportation, but other costs may increase like vacation. Make your current expenses as your starting guide to come up with a feasible retirement budget. If you may, try living within your means to find out if your current budget is workable when you reach your golden years.
Add Up Income
When you retire, you will have several sources of income, including Social Security, pensions, and the like. Try to estimate every possible source, then add those up.
- Earnings from work. Many retirees still work, either part-time or full-time, even during their golden years. They have various reasons for doing such. However, it does not always work. So do depend on something you are not sure of.
- Investment income. Your investment and retirement accounts could give a considerable portion of monthly retirement income, especially if you do not have enough traditional pension. At the age of 70, you will have no choice but to withdraw a specific amount every year from these accounts (except Roth IRAs). To determine the possible income from these, imagine you can withdraw 4% of the principal plus a small annual increase for inflation, every year during retirement without depleting your savings.
- Social Security. Visit the Social Security website and use their Retirement Estimator or other calculators.
- Employer pensions. Benefits from these pensions may differ depending on when you retire and the manner of withdrawing the money. Talk to your plan administrator to appraise the potential pension income under the payout scheme of your choice.
Compute the Figures
You have estimated your expenses and figured out your potential source of income. If the estimated income is higher than your projected expenditures, most likely you are ready to retire. Yes, some things may happen to delay or derail your plan, but this is a good start to determine your retirement preparedness. In case of a shortfall, do not fret. You can still do something about it, such as delaying your retirement, modifying your plans, saving more aggressively, or reducing your retirement spending.
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