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We are going to look closer at some of the issues around retirement planning. Retirement planning is really about priorities:
• When do you want to retire?
• How much would you like to spend in retirement?
• How much can you save before retirement?
• Will you work some in retirement?
There are many factors that you don’t have much control over, such as:
• How long will you live?
• How well will your investments perform?
• Are there any unexpected expenses?
Even though retirement planning isn’t precise it’s worth planning and updating it annually. It can help with setting financial goals for yourself and set expectations for your future.
The inputs that go into determining when you can retire are basically five:
• Your expenses in retirement? Considerations include: where do you want to live, transportation, healthcare, and inflation.
• Your income in retirement? From investments but also from Social Security, part time job, pension, rental, or inheritance.
• How much can you save before you retire?
• How long will you live? There are many free life expectancy calculators (https://www.blueprintincome.com/tools/life-expectancy-calculator-how-long-will-i-live/) but, of course, they are all estimators.
• Do you want to leave any money when you die? To people or organizations. Could you sell your home and use the proceeds to fund the last few years of life?
Whatever number you come up with, it’s only an estimate. We cannot know the answers to all these questions. However, it is worth having an idea of what your long-term investment goals are. We recommend updating your retirement plan annually to be sure you’re on track.
There are many tradeoffs to think about in these calculations. If you want to reach financial independence sooner, you may want to consider a simple lifestyle that could include living in a less expensive community or in another country. If you want to spend a certain about and maintain a certain lifestyle, it could mean working longer.
If you need support with your retirement plan or want someone to check over your plan, please contact us and we’d be glad to help you: aiofinancial.com