As retirement approaches for yourself or a loved one, you will need to materialize a retirement plan that can help you stay accountable for and on top of your nest egg. This retirement plan should include finances, living situation, and a timeline for your eventual death. Here are the five most important questions to answer about retirement.
Many people save up for retirement by making contributions to their 401k or Roth IRA. Retirement savings funds allow people to save up money, generate interest over time and eventually withdraw that money to cover the costs of their non-working years. Some are unable to save enough and are forced to either live with family members or continue working into their 60’s. No matter what age you’re at, it’s essential to prepare for your future financially.
How Long will Retirement Be?
Some people underestimate how long they will be alive for, leading to financial turmoil in their years when they are the least prepared to handle it. With current medical science, people should expect to live well into their 80’s and 90’s and plan accordingly. If you are married, it’s especially important to address the question of retirement with your spouse to ensure you both will be able to contribute a suitable and safe amount of money to your shared retirement fund.
Expenses and income will change as you age, and if your spouse passes away as the primary breadwinner, you could be in severe financial turmoil. Everyone needs a contingency plan and safety nest in case the worst scenario happens.
How will you manage the rest of your money?
A solid investment strategy is the first step to having a solid nest egg to rely on in old age. You will need this investment portfolio to last you well through your retirement. However, so careful planning and possibly professional assistance are necessary. According to a study by Ameriprise Financial, 71% of retirees say they think their money will last the rest of their lifetime, but only 21% feel confident in how to spend that money.
A retirement spending plan should incorporate all known externalities such as what age the person plans to retire, where they plan to live, if they have any supplemental income streams, if they will have any future medical needs, or if they will be living in an assisted living facility. Your retirement plan needs to have a solid spending strategy in place that should get revisited each year as the markets and your spending habits change, both before and during retirement.
What will you spend your time on?
For most people in America, spending takes a steady decline after the age of 75 as most people are less active overall and have less desire to undertake expensive activities or adventures. However, you may still find yourself wanting to complete world travels or other activities in your retirement with all the free time you will have. You should have a location in mind for spending your retirement years and an idea of what kind of traveling you will do, as well as what the budget for that traveling will be.
Think of your current lifestyle and expand those spending habits into the future. Will your net income and assets be able to cover these costs? What if you add the expenses of vacations and miscellaneous other activities? Making an accurate forecast of your spending and living habits is paramount for having the lifestyle you desire in your retirement.
When will you be able to retire?
This question goes back to the prior question about how long your retirement will be. Most of us envision retiring young and healthy enough to travel the world, but the truth is that you may need to put off retirement if you’re not financially prepared. Compare your spending estimates to your cash sources and modify your spending until assets and income can cover expenses.
An expert financial adviser could be of paramount importance in this instance. These types of professionals can tell you what you need to accurately build your retirement and help you invest based on your circumstances.
When will you begin Social Security?
Social Security is the biggest inflation-indexed source of income for most people in the United States. What many people don’t know is that you have choices when it comes to when you will receive these benefits. For example, different payouts are depending on your marital status as well as what your healthcare needs are. If you expect to have many medical expenses, it may be best to max out your insurance coverage options.
When will you be ready to retire?
Retirement readiness should not be decided purely based on age. Retirement readiness is a mindset that means you are ready to leave behind the workplace. For many, work gives us a sense of purpose and set of activities to do every day. We may dread showing up on Monday, but it gives us all a sense of structure and purpose. You need to ask yourself if you are truly ready to have nothing to do anymore and if you’re prepared to leave behind work to try something completely different. This state of mind is not necessarily reached at the same time for everyone, but it should be pondered as you grow closer and closer to the age of retirement.
If you are worried about the financial and emotional uncertainties of retirement, then consider visiting a senior living community at one of our numerous Landmark Senior Living locations! At our senior living communities, we offer programs and services designed to enlighten and engage all residents. If you or someone you love is considering a senior living facility, take the first step today and reach out to our passionate staff at Landmark Senior Living.