How to plan for retirement
Ask these 6 retirement planning questions
When you are planning for retirement, deciding how much money you need and how much money you have are important steps. However, they aren’t the only ones. You’ll also want to decide what you want to do, where you want to live, and how you will plan for the care you might need as you get older. Think about these questions when you are planning for retirement:
What do you want to do when you retire?
Do you want to spend more time with family or friends? Do you want to travel? Start a new career or volunteer at an organization? Pursue a passion, like gardening or painting? Exercise more? Study a new subject? Deciding what you want to do when you retire is a good way to begin your planning.
Where do you want to live when you retire?
A big part of retirement planning is deciding where you want to live. Many people want to continue living in their homes. Others think about moving to a new community or buying a new home in their current community. Think about these decisions.
- Where to live. Consider factors like the cost of houses, cost of living, access to medical care, and transportation. Learn more about deciding where to live.
- Downsizing. There are pros and cons to moving to a smaller home. Learn more about downsizing.
- Condos and townhomes. Many people downsize their homes to a townhouse or condominium. Learn more about buying these smaller homes.
- 55+ communities. Retirees often think about moving to a community dedicated to older homeowners. These communities have pros and cons. Learn more about 55+ communities.
- Selling your current home. Many people sell their homes when they retire. Learn more about how to sell a home.
How much money will you need to retire?
Determining how much money you need to retire can be complicated. Think about working with a financial professional to help you decide. You’ll need to consider the cost of housing, food, clothing, transportation, and health insurance, as well as money for travel and other leisure activities.
You should think about how long you will need this money. If you retire at 50, you may need more money than you would need if you retire at 70. Also, think about if you want to leave money to family, friends, or organizations at the end of your life.
How much money do you have to retire?
Once you know how much money you’ll need, look at how much money you have. Estimating how much money you’ll have in retirement can be complicated, especially when you have retirement accounts or investments that might rise or fall in value, depending on their performance.
Think about working with a financial professional to help you decide. You might have multiple sources of income during retirement. These sources can include:
- Pensions and retirement accounts. Pensions typically guarantee you a fixed amount of money each month. The value of your retirement accounts can vary, depending on how you invest the money, as well as market performance.
- Social Security. Social Security typically pays you a fixed amount of money each month. This amount is influenced by how long you work, how much you make, and when you begin taking payments. Sometimes, your Social Security payments are adjusted for inflation.
- Home equity. For many people, their home is their largest asset. Consider the value of your home equity when you are planning for retirement. Remember that selling a home typically comes with costs you’ll need to pay.
- Job income. Many people retire to work less, not to stop working altogether. Think about how much you might want to work after you retire and how much you might earn.
- Investments. You can invest in stocks, bonds, and other financial institutions outside of retirement accounts. Include these investments if you have them.
- Cash. It’s a good idea to have an emergency fund in cash before and after you retire.
How will you pay for healthcare when you retire?
Healthcare can be a big expense, especially when your retirement plan does not include health insurance or when you retire before you become eligible for a program like Medicare or Medicaid. Look at these expenses and plan accordingly. Many people who are eligible for government health insurance consider paying for supplemental coverage.
Where will you live when you can no longer take care of yourself?
No one likes to think about growing old or sick. However, many of us will require nursing care at the end of our lives. Think about how you will manage these risks, where you want to live, and how much it will cost. Many retirement communities offer continuing care, where you can live independently, get help to keep living at home, and have nursing care when you need it.
Retirement can be an exciting thing. You’ll have the leisure to pursue the things you may not have had time for in the past. Using the tools we’ve listed above can make the transition to a retired life go more smoothly. Enjoy your retirement!