Retirement not only requires you to prepare for your financial future, but it also requires personal and psychological preparation as you ease out of the workforce and into a new, leisurely lifestyle. Arriving at this momentous milestone in life should be something to look forward to, not dread due to insecure finances or poor preparation. When asking yourself the question “Is it time for me to retire?”, there are a few things to consider before quitting your commute and hitting the beach.
3 Questions to Ask Yourself
According to investment counselor Larry Hungerford, there are three questions all future retirees should ask themselves:
- How satisfied am I with my job?
- I know what I am retiring “from,” but do I fully understand what I’m retiring “to”?
- Do I have enough sources of retirement income to fund my “vacation forever” lifestyle?
A lack of job satisfaction is certainly one of the most common reasons why people consider retiring. Overwhelming schedules, inflexible due dates, and poor management are all contributing factors that makes retirement look like a necessary emotional escape. Some individuals, instead of leaving the workforce entirely, decide to start their own dream business or find a job that better fits their needs as they grow older. No one wants to spend their life miserable at a job they take no pleasure in. Look at retirement like a fresh start--a new chapter just waiting to be written.
What Are You Retiring To?
The abrupt shift from a daily schedule filled with activity and purpose to one of simplicity and relaxation can oftentimes create a sense of uselessness and boredom. Without a daily sense of purpose usually provided by one’s work, retirement may appear shallow and unfulfilling if not properly filled with hobbies, travel, education, and both spiritual and personal growth. To get the most out of your retirement, invest your newfound time in seeking out new experiences and creating lasting friendships.
Establish Realistic and Personal Financial Goals
Preparing your finances for retirement is not something to take lightly, so take ample time to carefully plan out your financial future. The average retiree should have a retirement income worth at least 75%-80% of his/her original income they received before retirement, though more is highly encouraged. Furthermore, it is suggested to retirees to save three times their average annual salary by age 40, six times by age 50, and eight times by age 60, and ten times by age 67. In terms of retirement spending, Wealthfront provides an interesting calculation.
While many people worry that they might overspend their savings, a commonality among retired individuals is the tendency to oversave, withdrawing only the bare minimum each year from their retirement fund. As a general rule, aim to withdraw no more than 4% to 5% each year, adjusting for inflation. While a good starting point, plan to adjust your rate of withdrawal to better personalize your retirement as each individual spends money differently according to age, sex, and activity level.
Lower Your Financial Risk
If you tend to oversave rather than overspend and are in good health, consider delaying your Social Security and investing in an income annuity that will pay steady, guaranteed lifetime income as you age. By having at least two guaranteed sources of income (three if your employer offers pension), your risk for financial troubles during retirement is greatly reduced.
How We Can Help
Start thinking about what you want out of your retirement today. Examine your financial resources and determine whether or not you have sufficient funds to support your desired retirement lifestyle. While planning for retirement may seem like a heavy weight on your shoulders, it does not have to be. Remember, it’s never too late to start planning for your future.
Having an experienced professional examine your estate plan while taking retirement into consideration is your number one asset in planning for financial prosperity. The attorneys at Smith Strong, PLC are here to help guide you as you begin the process of retirement. For more information or to sign up for our free Estate Planning Workshop, call (804) 325-1245 or (757) 941-4298.
Editorial Assistance by: Isabella Cruz