Retirement… a word that can mean so many different things. For some, it means days of leisure. Perhaps traveling, volunteering, or spending more time with family. For others, it might be a time to turn a hobby into a small business or pursue a second career doing something they couldn’t afford to do when they had a family depending on them for support. Ultimately, retirement is about being able to pursue whatever moves and motivates YOU. After years of hard work, you're entitled to a happy retirement, right? We believe you are, but knowing when it’s the right time to retire can be surprisingly difficult.
Are you mentally ready? If you are one of the lucky ones who love your job, you might find leaving surprisingly hard to do. Professional athletes are perfect examples, many retiring and then ‘un-retiring’ because they miss the game. After you binge-watch those Netflix shows you’ve been wanting to see, and organize the junk drawer, do you have a plan for how you are going to spend your days? And remember, unless you live alone, your retirement doesn’t affect just you. If your partner will still be working when you retire, does that change how you plan to fill your days?
Are you financially ready? For many people it comes down to a matter of money. What you don’t want to happen is to be forced back into the workforce because of financial necessity, so making sure your finances are ready is important. Having a retirement budget can make all the difference! A few things to keep in mind when figuring out what your income and expenses will be:
- Inflation will affect your buying power, so be sure to factor this into your budget
- Healthcare expenses are often overlooked but can have a substantial impact as you get older. And remember that you may, at some point, require some form of extended care, so be sure to include that in your retirement plan as well.
- Grouping your expenses into "must-haves" (housing, food, utilities, medical, etc.) and "wants," (such as travel, entertainment, and dining out) will make it easier to figure out whether you’ll have enough income to cover your expenses.
- When adding up your income sources, remember that you will owe income taxes on distributions unless they are from Roth IRA’s, Roth 401(k)s, or a portion of Social Security benefits.
- If you are thinking of retiring early, take into account that you won’t receive full Social Security benefits until you reach your full retirement age. You can check the Social Security website HERE to see how much you can expect.
Of course, these are not the only things to consider depending on your individual situation. The good news about retirement is that it’s far from the end of your story. It’s merely the next chapter and might even be rewritten if you find yourself feeling bored or frustrated with a lack of schedule. Take some time now to think about what you want to get out of retirement and what paths you might consider that will make you happy and content in the next step of your life's journey.