Your answers will help you decide what steps you need to take to reach your goals.
When you hear the word “retirement,” what do you see in your mind? For some people it’s a house on a beach or trips to exotic locales. Others just want more time to spend with their grandkids.
Retirement planning must be a long-term, evolving event. The best plans are the ones that provide enough timeline and flexibility to allow you to make changes as your situations change. Answering the following questions based on your current situation can help you set the plan to reach your goal:
- What does your ideal retirement look like to you? There are practical elements to consider when making your grand plan. If you’re looking forward to spending more time with family and friends, it might make sense to maintain your existing home. However, an avid traveler may want a small house close to an airport or seaport—and a golf enthusiast may want to find a dream home near the 18th hole.
- How long do you think you will live? It’s a fact: People are living longer. With people living into their 80s, 90s and 100s, we’re spending a lot more time in retirement. The number of years you should plan for depends on your life expectancy. Life expectancies are stated as statistical averages, so you could have more or less years than what’s shown on a chart somewhere; in fact, about half of all people outlive their life expectancy. The key is reviewing your lifestyle along with those statistics and being prepared for the changes that will come later in life.
- How much money do you think you’ll need? Assume this number is between 65 and 85 percent of your current income, if you want to maintain your current standard of living. Assess your 401(k), IRA and retirement savings now to determine how much retirement income you can generate. You may want to take more risk or plan on working longer if the numbers aren’t where they need to be.
- Who will pay for your health benefits? Plan for a time when your employer no longer pays for your healthcare. Private health plans can be expensive, so be sure to set money aside and hold on to group coverage through COBRA for as long as you can.
- Have you made an estate plan? Although an unpleasant part of retirement planning, you will want to ensure your assets are set up to be properly transferred to your heirs.
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