It’s one thing to understand the facts about your retirement benefits system; it’s quite another thing to understand whether you’re really ready to retire! There are many different ways to answer this question, but taking the following fives steps will give you a better overview of where you stand.
Take a look at your current living expenses. Do you currently pay for a lot of unnecessary expenses, that you might not be able to afford during retirement? No one is saying that you shouldn’t have any fun, but be honest with yourself about your future retirement lifestyle. It’s often better to gradually cut back on luxuries now, in the years before retirement, than to make a sudden transition to a more frugal lifestyle. And as an added bonus, cutting expenses now will help you save more money for the future.
Be honest about your debt. Do you want to enter retirement saddled by debt? Probably not! You hope to enjoy your retirement without the added stress of unnecessary bills. Even if you have to work a year or two longer to pay off credit cards first, it will be worth it in the long run.
Consider your house payment. Speaking of debt, your house payment might be your biggest one. Ask yourself whether you need that large home, or whether another location might offer a lower cost of living. Many retirees can cash out enough equity from the sale of their old homes that they can pay cash for a smaller condo or house. At the very least, you could significantly reduce your monthly living expenses by making a single decision.
Estimate your health care expenses. Health care bills are some of the largest expenses faced by retirees. Make sure you understand the benefits and limitations of the health care plan you will use in retirement. You don’t want to be surprised by large co-pays or deductibles, or the cost of long-term nursing care. Carefully consider the additional forms of insurance available to you, such as long-term care insurance or Medicare supplemental plans.
Establish an emergency fund. When planning your retirement budget, ask yourself how you will cover the cost of emergencies. What will happen if you need a major car repair, a new roof on your home, or some other significant expense? Make sure to set aside some liquid funds in a savings account before you retire.
For more help estimating the cost of your future retirement lifestyle, call our office to schedule an appointment. We can help you make the necessary adjustments to your current and future budgets, and decide upon a target retirement date.
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