Before diving in, we want to be clear: we strongly encourage you to seek professional guidance on retirement. For example, Prepare + Prosper’s Financial Continuum of Care page includes a good resource for financial planning. While many personal finance websites like NerdWallet, CNBC, or AARP have fairly comprehensive, easy-to-follow guides, talking with a trustworthy professional about your unique situation is often the best approach to retirement planning.
No one can predict the future, which makes planning for retirement particularly challenging. Although it is difficult, it is essential to prepare as best you can for your retirement. Here are some guiding questions to ask yourself as you build your retirement strategy.
For many Americans, ages 62 to 70 is the general range for retirement. However, several factors may influence when you retire, including reaching your “full” retirement age to maximize your Social Security benefits. Having a rough idea of your retirement age (plus your projected life expectancy after retirement) can help determine your “investment time horzion,” your risk tolerance, and your projected longevity.
What are your anticipated sources of income?
Instead of collecting regular or semi-regular paychecks from wages earned, income in retirement typically comes from personal savings or government benefits. Here are examples of primary incomes sources in retirement:
A commonly referenced benchmark for determining post-retirement expenses is to use about 80% of your pre-retirement income. While that’s quite a bit of money, it likely will be very different from your current spending habits. Here are some expenses that might change before or following retirement:
Given your expected retirement age, anticipated income, and projected expenses, use a retirement calculator to estimate whether you’re on track to hit that goal. If your strategy could use some help, try a few of these methods:
Money Management E-Newsletter: September 2021