Retirement might seem very far off into the distant future. But even so, it’s one of those things in life that requires lots and lots of planning.
Retirement can last anywhere from 20 to 30 years but shockingly, a third of Americans have less than $1,000 saved up. If you want to live comfortably in retirement, you have to starting thinking about, and planning for it, right now.
As you think about what retirement looks like for you, here are 7 questions you need to ask yourself:
1. When do you want to retire?
The ideal retirement age is different for everyone. You may want to retire as early as possible, while someone else is perfectly content working until the age of 65.
Before determining how much you need to save for retirement, you first have to pick a targeted retirement age. There’s no right or wrong answer and it all really depends on your personal life goals. But remember, the earlier you want to retire, the more you’ll need to save.
A few factors to consider before choosing a specific retirement age include:
Take all of these into consideration while making your decision. And before finalizing everything, make sure you add in question #2 below.
2. When does your spouse want to retire?
Similarly, if you are married, you have to consider your spouse as well. When does he/she want to retire? They may want to retire earlier than you in order to travel.
Or perhaps they have health problems that won’t allow them to work as long as you can. What’s the plan?
Not only is it a matter of finances between the two of you but it’s also about life goals and aspirations that you share. Ideally, you both will be in sync when it comes to when you want to retire and what you want to do.
3. Will you be eligible for Medicare?
Having proper health insurance is crucial, especially during your retirement years. If you retire at the age of 65, you should be eligible for Medicare. However, if you choose to retire early, you’ll have to consider other health insurance providers.
Another factor to consider is Social Security benefits. Do you or your spouse qualify for those? And if so, how does this affect your overall income?
4. Where do you want to live during your retirement?
You always hear stories about people moving to Florida when they retire, and it’s for good reason. The cost of living there is considerably lower than most major cities. In addition, it’s sunny and warm.
Think carefully about where you want to live during your retirement years. Many want to be close to their kids and families. But if you’re flexible, your retirement fund may be able to go a lot farther if you move.
This is something even motivational speaker Tony Robbins suggests is a smart idea;
“If there were a way you could save 10 percent to 20 percent, or more, of your current costs and invest them to bring financial freedom a decade closer — and perhaps have an even greater quality of life — wouldn’t you owe it to yourself to push beyond the obvious obstacles and consider your options?”
5. Will you be working part-time?
Not all retirees stay at home catching up on reading, or play Bingo on weekends. Many choose to work part-time or have a small project on the side to fill up their time.
Is this something you or your spouse are considering? Do you have a hobby you can turn into a part-time job, or weekend gig?
This will bring in a small amount of income, which can definitely help during retirement. Perhaps it can even fund weekend getaways or a summer road trip.
6. What do you want to do during your retirement?
Many of us dream about retirement where we finally have the time to do the things we’ve always wanted to do. What does retirement look like for you? Will you travel, invest in fixing up your home, or some other activity?
Whatever it is, try to have a good understanding of what your life goals are during retirement. You not only want to spend that time wisely but you also want to make sure you can fund whatever it is you want to do.
7. How much do you need to save?
And finally, the most important question of them all: how much do you need to save? To get this number, calculate and consider the answers to all the questions above.
Then, factor in how old you currently are, how much you need to save each year, and how much interest you’ll get if you start saving now. It may be a very rough number but at least it’s partially accurate to help you get started.
Your goal of retirement is possible. You’ll just need to adjust along the way but at least you’ll be closer to achieving your goal.
What’s another question you should ask yourself about retirement? How do you figure out the number you need to make your dream come true?