Friday, January 13, 2012

3 Questions to Ask Yourself Before You Retire

Retirement is an important milestone in a person's life that ironically approaches much faster than people expect, largely because it always seems so far away. But whether your retirement is two years away or twenty, it's never too late (or too early) to start seriously thinking about and planning it. A little planning is always better than no planning, and unless you want to work until the day you die, retirement is something that requires planning. 

The problem for most people when thinking about retirement, even if it's imminent, is that they don't know where to start. The basics of retirement planning start with three questions about your ideal retirement; the answers to the questions should provide a schematic you can follow to help you get there. Granted, you might have to make adjustments and compromises depending on your current situation, but the questions will get you thinking and planning, which is the most important part.


When?

The first questions you need to answer is when you want to retire. If you dream of retiring at or before 60, that will drastically affect the time you have to save and invest, especially if you are already past 40 or 50. An early retirement also means that you'll have to save more so that you can provide for yourself for 20 or 30 years without working.

Knowing when you want to retire will tell you how you need to spend your remaining years before retirement. If you're still young, you'll know that you can regularly contribute a moderate amount to a savings fund and set yourself to hit your target date; if, however, you are older, you might have to push your date back, or find a way to frequently make larger contributions to your retirement fund.

How long?

While similar to the first question, this question is more concerned with how long your retirement will last — in other words, how long you expect to have to provide for yourself without working. Most banks planning to live to 95, just to be on the safe side. It's always better to have more money than you need, rather than not enough, especially when you are over 80.

How much?

This is where numbers are important: how much money will you need? To answer this question you'll need to know a few other things as well:

  • Where do you plan to live? 
  • Do you plan to travel? How frequently? 
  • Do you want to live in luxury? 

The kind of retirement you want will determine how much you'll need, as does your target retirement date. Obviously you'll need to save more if you want to move to an upper-class neighborhood, travel the world for years, and do it all first-class. A standard figure is 80% of your pre-retirement income, but you will have to decide for yourself exactly how much you'll need, based on your ideal plan.

Other factors that you need to consider are your current savings and investments, as these will grow over time and give you cushion. The main idea is to figure out how you want to live after you retire so that you know how you need to live before you retire.


This guest post is contributed by Angelita Williams, who writes on the topics of online courses. She welcomes your comments at her email Id: angelita.williams7 @gmail.com.

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