What do you picture retirement as – lounging on the beach, playing golf, or traveling the world? While none of these come cheap, they are attainable with proper budgeting. Retiring isn’t the hard part, staying retired is. Here are some questions to ask yourself to see if you are ready for retirement.
What do you plan to do in retirement? Retiring has been mainly linked as an emotional decision, rather than a requirement. Many retirees have a hard time transitioning into retirement, so make sure you save enough to last. Secondly, people who are busier and healthy tend to be happier and healthier. Make sure you have plans for your transition to occupy your time when leaving the workforce.
Is it a good time to quit the workforce? Experts suggest waiting to retire if your finances aren’t in good order. Figuring out how you want to live and what that lifestyle costs is imperative to knowing if you’re financially ready to retire. Start by reviewing your monthly expenses and whether your resources can cover these. Jonathan Clements, director of Financial Education for Citibank, suggests delaying retirement until you’re debt free and without any mortgages, auto loans, credit cards or other consumer debt to help lower expenses. Also, as you create a cash flow of expenses and income, some suggest increasing your expenses by 3% annually to account for inflation.
Do you have enough money saved for your expenses? It’s great if you have a lot of money but you need to turn that into an income stream,” says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. You want a guaranteed income in the form of annuities, pensions and Social Security to cover basic expenses, like housing, medical expenses, utilities and food. If your pension and Social Security isn’t enough, Halliwell advises against withdrawing more than 4% each year from your retirement portfolio to cover expenses. “You can buy an annuity to cover that difference but it costs more to get that payment because rates are so low,” says Halliwell. Even though annuities are expensive right now, they allow you to lock in that payment for the rest of your life.
Do you have health insurance? Many retirees do not adequately budget for health-care cost. If you don’t qualify for Medicare, be sure to have a plan in place to cover additional expenses.
For more information on retirement planning and creating a guaranteed income stream you cannot outlive, visit http://www.retirementthinktank.com/.