For most people, retiring means the end of a paycheck. When you retire, how will your lifestyle be affected? If you don’t know the answer to that, don’t you want to find out before it’s too late? There are so many things to take into consideration, including:
Retirement age – Modern retirees face lots of choices that their parents did not have. There is no longer a mandatory retirement age, so the question of “when should I retire?” gets more complicated.
Social Security – The age at which you apply for Social Security benefits has a big effect on your retirement income. Apply early and you reduce your monthly benefits by 25% – 30% depending on your age. Wait until you’re 70 and you increase your monthly benefit by up to 32% (8% per year) depending on your age. If you are married the decisions get even more complicated.
Pension – If you are entitled to a pension, the amount you receive usually depends on your length of service. The formula used to calculate pension benefits can get quite complicated. Those who work for employers with questionable or shaky financials may want to consider whether they will get the benefits they are promised. If you are married, you will need to decide how much of your pension will go to your spouse if you die first.
Second career – An increasing number of people are going back to work after initially retiring. Quite a few people don’t really want to stop working, but instead want to do something different or less stressful in their retirement. Others use their skills to become consultants, or turn a hobby into a business. A “second career” makes a big difference in your retirement lifestyle and how much income you will have in retirement.
Investment accounts – These are the funds you have saved for retirement in: IRAs, 401(k)s, 403(b)s, 457s, and individual accounts. These funds are under your control. Most retirees use them to supplement their Social Security and pension income. They play a very large role in determining how well people live in retirement.
To find out whether you will be forced to cut back after you retire, you need a plan that allows you to take all these factors into consideration. A plan allows you to gauge your progress and make corrections before it’s too late.
If you have questions, or if you would like to create a retirement plan, contact us.