Somewhere around 50 or so most people start to get serious about retirement thinking. While this is way to too late to begin the process to make it easy, it is still better than doing nothing. Regardless of when you start to consider your retirement years, the worries are about the same. The only difference is the amount of time remaining to prepare. Working through these 10 retirement concerns will give you an idea of where you stand in your preparation.
How quickly do you need to save?
Age matters when it comes to retirement planning. Having 40 years to prepare is better than having 10. To reach $1,000,000 at retirement requires an investment of $100 per month for 38 years at 12%. If you increase it to $200 per month, you can reach $2,352, 954.50 in 40 years. At the same interest rate, it will require a $4,400 per month investment to accumulate $1,000,000 in 10 years. If the interest rate is cut in half, you can reach the $1,000,000 plateau in 40 years with a $500 per month investment. Any way you slice it, starting early is the way to go.
How much income will you need to maintain your lifestyle?
While retirement can lower your cost of living, it does not always. Adjustments in lifestyle often suck up any savings realized from not having to go to work every day. Becoming a de facto child care provider can be expensive. Extra travel requires cash. You will need to decide how much of a lifestyle reduction that will be acceptable to conserve cash. If you hope to improve your style of living in retirement, it may actually cost you more to be retired than to work.
How often do you dip into your retirement savings?
The road to retirement can be bumpy. People often need to use a portion of their savings to cover emergencies. If this requires you to dip into your retirement savings, it will slow your rate of current and future growth. Too many withdrawals for living expenses may result in little to nothing left for retirement. If you find yourself constantly depleting retirement accounts, you need to rework your retirement plan into something that can be maintained.
How is your health?
For many people, health issues escalate in retirement. If you already have sizable medical expenses, you will need to address this in your retirement planning. Unfortunately, retirement age and unexpected health problems can arrive simultaneously. Keep good health insurance. After age 60, you should at least consider buying long-term-care insurance.
Do you have significant debt?
Debt is the big dog on the block when it comes to retirement worries and concerns. There are government programs and benevolent ministries to help impoverished seniors. None of these programs are designed to help you pay off debt. Money used to service debt is lost to you until the debt is retired. If you have to choose between intense saving and intense debt payoff, choose paying off the debt.
How long will you need your retirement accounts to last?
Early retirement sounds nice, but it means that you have to fund those additional years. Often company funded retirement plans and Social Security benefits have age qualifications built in before they can be tapped for income. Early retirement is frequently funded by personal investments or some type of dividend or royalty income. If being retired longer means drawing from your savings for more years, you need may need to beef up the amounts needed to fund retirement.
What will the cost of living be where you plan to retire?
Your cost of living will not automatically change at the moment of retirement unless you intend to relocate. Doing some research about living expenses in the area where you will live is important. If you plan to change residences in the same area, it may impact your costs up or down depending on where you choose to live. Living out of the country can influence your expenses due to exchange rates and the scarcity of commodities that you may prefer to have.
Will you have a network of support?
Retirement works best when you have friends and family to support you if needed. This support may be in the form of help with repairs and chores or emotional support. Transportation can be a big problem as you advance in age and lose your ability to drive. A retirement plan that includes building a support network as well as an income source is vital for a long and happy retirement. A support network of active friends can also keep you active and stave off issues of loneliness and depression.
Can you maintain an emergency cash reserve?
The idea retirement situation is that you have more income than living expenses. This will allow you to save something each month to cover emergencies and inflation. Once you lose your ability to maintain and emergency fund, retirement will lose a lot of its luster. This is the situation that sends many seniors back into the workforce 5 or 10 years after retirement. Others are tethered to some type of job for the remainder of their life.
Have a plan in case retirement comes before it is expected.
Heart attacks, accidents, and other unexpected crises can influence when you retire. Having to retire 5, 10, or 15 years before you planned is not a big concern until it strikes you. Part of your thinking about retirement should include a contingency plan for an unplanned early retirement. You cannot plan for every possibility, but you can have a general plan in place to fall back to if this hits your life. This might require some extreme financial decisions like bankruptcy to conserve whatever assets that you can to help you cope with your current circumstances.