Ideally, we should start planning for retirement in the early days of our careers (perhaps even in our twenties). In reality, many of us don’t think about retirement until our late thirties, forties, and beyond. No matter where you are in the retirement planning process, we do suggest you start with these four basic questions. Then, we can help you consider other factors that might affect your plans, and decide how to deal with them.
When do you hope to retire? Many of us want to retire as soon as possible, while others are enjoying their careers. But you probably have some idea of when you want to transition into your new lifestyle. As you consider your expected retirement date, keep the following goalposts in mind:
- Before age 59 ½, you usually can’t withdraw funds from a qualified retirement account, without paying a tax penalty.
- At age 62, you can draw Social Security benefits early, although the benefit amount will be reduced.
- At age 65 to 67, you will reach your full retirement age (defined by your birth date) and can access your full Social Security benefits.
- At age 65, you are eligible for Medicare. Remember that your spouse needs a medical insurance plan, too.
What is your expected budget? Most of us expect that our living expenses will decrease somewhat in retirement, but that isn’t always the case. If you hope to pursue travel or other leisure activities, be sure to factor those into your budget. Also, remember that long-term nursing care is a common need at some point in retirement.
Inflation is the final budgetary factor to consider. Your expenses in 15 to 20 years will look very different from how they add up today.
How long can you live off of your savings? If you’re age 65 today, you can expect to live to 84 (if you’re a man) or about 87 (if you’re a woman). Those are just average lifespans. One in four will live past age 90, and one in ten will live past their 95th birthday. It’s great that many of us can look forward to a longer retirement, but we do need to plan on an income that also lasts that long.
How much can you save before retirement? The prior two questions have helped you gain an understanding of how much you need to save. Now, compare that figure to your answer to the first question. Can you save that amount by your expected retirement age? Schedule an appointment with us, and we’ll asses your savings and make recommendations on how you can reach your goal.
