You all will retire at one point in your life, and you know this fact very well, but hardly any of you is completely prepared for retirement because you do not see how much money you need at that stage in your life. Experts suggest that you should save at leave 15% of your current salary.
Retirement planning is quite challenging because it is not just about picking a random figure you need to save by that time, but it is about choosing a figure you need to serve your retirement life. Unless you define retirement for yourself, you will not be able to decide how much money you need to live your retirement life.
Most people do not bother to do it and try to follow others. What seems to be enough for your friend cannot be enough for you to live the retirement life. This is because both of you have a different way of living your life. After your retirement, your life will completely change.
It is crucial to develop a clear picture of how you want to live after retiring. Your retirement life will be different if you have a partner. For some people, retirement life is just doing nothing and sitting at home, but most people find this lifestyle monotonous and seek out activities.
What would you like to do then? Will you travel more often? Will you fund the needs of your grandchildren? Will you move out of the city? It is essential to define retirement to figure out the money you need. Here are the retirement questions that you should ask yourself to know if you are ready to retire:
How much money do you need to live off the retirement age?
It is pretty tough to determine how much money you need to live the golden years of your life because it depends on various factors like your life expectancy, your lifestyle, your life goals, and how much you spend in a particular year. No one wants to run out of retirement savings, but that is quite impossible to determine how much money you need to live off then.
Therefore, experts suggest that you try to save 20 times the annual amount you are currently spending. You should determine the average monthly spending. However, if you have decided to spend your retirement life without doing anything, you may not need 20 times your current spending. During retirement, expenses are cut off, and this is because your lifestyle has changed.
It automatically removes a lot of activities that you do at your young age, but it does not mean that you will not come across unforeseen expenses. For instance, you may need Xmas loans to fund Christmas celebrations. However, this sort of approach is not appreciated when you are a person who loves doing some sort of activity.
For instance, you will definitely need money if you have decided to travel. Travelling is expensive even though you get rebates and discounts on your flight fares. There are some people who can manage to live off little money while the others will need a lot of money. How much amount you will need to live off retirement years depends on your lifestyle as well as the needs that you will likely come across at that time.
Have you accounted for your health?
Healthcare cost is an essential element that you cannot ignore while deciding whether you are ready to retire or not. Note that healthcare needs can put a lot of burden on your budget. Experts warn people against ill planning for personal finances because that leads to risking their retirement savings.
If you look to retire before 65, you will likely find health insurance expenses. However, if you retire at the right time, you will likely have some flexibility in the premium, depending on the coverage you have bought. It is good if you qualify for Part A coverage because it does not allow for premium payments, but if you qualify for Part B coverage.
Do not forget to take into account long-term care. Note that Medicare does not provide coverage for long-term health expenses. You should have a plan for taking care of such costs. Experts suggest that you set aside separately for these expenses, so your retirement savings do not fall short of meeting your regular expenses when your health expenses go up.
Do you need to downsize your house?
This is another intriguing question that you must ask yourself. If you think that you will be able to save 20 to 25 times your current spending, you will likely live your retirement life with ease, but it is easier said than done.
Most of the people fail to stash away such a lot of money, and one of the reasons for being unable to do so is outstanding short term loans from direct lenders. If you are habitual of taking out loans every time you need an emergency, of course, you will never be able to save this much amount. This is possible only when you build an emergency cushion to dip into such unforeseen expenses.
Although you plan about your retirement funds well, it may not be possible to determine the exact amount of money you will likely need at that time. This is why you should keep it at the back of your mind that you may need to downsize your house.
This is generally required when your retirement savings are not enough to meet all of your expenses at that time. If you downsize your house, you may add equity to your retirement funds and then utilize it for your day-to-day expenses.
If you have to downsize your house, make sure that you do not utilize that money to settle your outstanding debts like bad credit loans for students. It is suggested that you should have already determined your outstanding dues so you again do not fall short of money.
Do you plan to start your business after retirement?
Here the business does not mean a full-time business, of course. There are some people who do not prefer being at a loose end in the golden years of their life. They want to do something to pass the time. If you are one of them, you should decide what activity you will be doing to make money.
This can be a part-time business. You can produce income from any sources like craftwork, artwork, consulting services, or you can become a public speaker. You should look at your estate as well.
If you have some property other than your house, you should try to make it used to generate income. Even if you have just a small shop, you can rent it to generate rental income. You can use the rental income for living your retirement life smoothly.
Have you done estate planning?
Do not forget about estate planning. You may acquire a new property, so you will have to plan for it. You will have to clearly decide how you are going to lay out the plan around the estate. You should consult an attorney and prepare a will, so there is no dispute when you pass away.
The bottom line
Retirement planning is not that easy, especially because you do not know how much amount you will likely need. If you are looking to plan your retirement, you should ask yourself the questions mentioned above.
If you are unsure about your retirement planning, you should consult a financial advisor who can look at your finances and then guide you through them. This is a great way to understand your financial condition so you can prepare for your retirement accordingly.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
