4 Questions to Ask Yourself About Retirement
4 Questions to Ask Yourself About Retirement
One huge misconception about planning for retirement is that you only need to answer one question: How much do I need to save? It’s a myth that there is some one-size-fits-all number out there, and all you have to do is discover this magical secret number. It’s true that the end result of sound financial planning will address this query, but you have to go about it by first asking yourself these four important questions:
When do you expect to retire? Or more importantly, about how many years will you spend in retirement? You probably have a retirement age in mind – an end goal for your career, so to speak. But knowing that you want to retire when you’re 65 doesn’t really tell you enough. You also have to consider your life expectancy. While this can be somewhat unpredictable for all of us, factors like your lifestyle, your parents’ longevity, and your current state of health can offer some important clues. The bottom line is that your life expectancy minus the age at which you expect to retire will roughly equal the amount of years you spend in retirement. Keep these questions in mind when deciding how much money you need to save. You have control over the first factor, but maybe not so much over the second.
What will health care cost you? Figuring out an annual budget, and then multiplying that amount by the number of years you spend in retirement, will give you a good idea of the amount you need to save. But when most of us think of “budgets”, we think more of housing costs, food, gas, recreation, utilities, and so on. But don’t forget about healthcare! Remember the cost of health insurance, out of pocket expenses, medications, long term care insurance, and other considerations. Keep in mind, too, that the cost of healthcare is rising.
What are your expectations for retirement? After decades of hard work, you deserve to enjoy your retirement. However, this means different things for different people. Your budget will be heavily influenced by the recreational activities you hope to pursue, as well as your location, social life, and other such factors.
Once you have solid answers to these questions, a skilled insurance or financial advisor can help you attach a number to your retirement vision. Don’t forget to account for inflation, and leave yourself a little room for unexpected expenses.
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