Retirement is every worker’s goal. You might even periodically calculate the years you have left in the working world until you can retire and spend your days doing what you love. A successful retirement takes more than just putting in your time, though; it also requires adequate savings and a plan for living on your residual income once you leave your full-time job. Some people even face retiring without any type of long-term savings to draw on. Luckily, there are ways to prepare for retirement so it can be a seamless transition in your life from working for the man to living for yourself.
While getting insurance quotes or making other purchases, you might have noticed there are often discounts for retired individuals. Planning your retirement can help you to reach those savings faster and feel secure when you leave your job. There are five easy steps you can take to be prepared for life after work.
- Establish a timeline. It can be hard to financially plan for retirement if you have no idea when you’re going to retire. Pick an age at which you plan to retire and construct your savings goals based on that. This will help you determine both how much you’ll need to live for the rest of your life and how much to save each month to reach that ultimate goal.
- Think of your retirement expenditures. When you retire, odds are you won’t have quite so many monthly bills. You’ll hopefully have most if not all of your debts paid off, so try to calculate what you’ll be spending during retirement to set an overall budget.
- Calculate return on investments. Check how much you stand to make from any long-term investments based on their rate of return and figure it into your retirement income.
- Decide on your investment risk. Younger people tend to take a more aggressive approach in their investment portfolios, which stands to yield higher returns by the time they retire. If you’re older and looking to start a retirement portfolio, you might want to opt for more conservative options.
- Other planning. Things like estate and tax planning can also figure into your retirement life, so try to keep up with those things as you age. You can even hire professionals, such as lawyers and CPAs, to handle those things for you.
Signs It’s Not Time
You might know when you want to retire or where your job sets the finish line, but sometimes even when you hit those predestined milestones, the timing just isn’t right. Perhaps more important than knowing when to retire is knowing when not to retire. Here are a few signs it’s not quite time to turn in your name badge.
The first clue it might not be a good time to leave your full-time job is if you’re struggling to pay your monthly bills. Remember that your retirement income will only be a percentage of your working income, so if you’re struggling while working full-time, you almost certainly won’t make ends meet in retirement.
Your debt-to-income ratio is also a good indicator of your financial health. If you’re still paying on considerably sized debts, then you’ll most likely be better off continuing to work full-time until those are paid off. Your retirement income should be designated to paying mandatory bills and funding your hobbies, not paying off outstanding loans.
Lastly, if you don’t have a long-term financial plan, it’s not time to retire yet. Before you leave full-time income, you should know how the rest of your financial life should look. Set a budget for how much you’ll need to live on each month, figure out where your income will be coming from, and then assess if your savings, portfolio, and retirement income can cover those costs.
Some other options include relying on social security income, working gigs or part-time in retirement, or relying on a pension for your income.
These can help, but planning for retirement can often get you much further and keep you more comfortable.