When you retire from your job, you may receive a lunch or dinner in your honor, the stereotypical watch or plaque in appreciation of your service, and some assorted gift cards, but never what you really need to finance your retirement – a money tree. Aside from any pay off you may have from accumulated vacation or sick leave, you are pretty much on your own. Ideally, you also have a pension and savings, plus Social Security to serve as the core of your retirement. Will it be enough?
You need to start thinking of how to finance your retirement from the time you start your first steady job, but most people are too busy handling the present issues in life to plan ahead 50 years. When layoffs and emergencies come, your retirement savings may have gone by the wayside. And you may even have dipped into your retirement savings if times were hard, you got laid off, or your withdrew money to buy a home or send your kids to college. If life got in the way of planning, you need to get serious about how your retirement finances will play out.
One thing you must consider is how much of your income you will need in retirement. You might not need some funds tied to work expenses (lunches, clothes, extra driving, parking), but how many of your other payments will continue into retirement? Is your home paid off? Do you have a car payment or other debt? Do you hope to travel? If so, you will need a high percentage of your current income. As you get older, you will need more money to cover health costs.
Regardless of your past savings patterns, you need to do some quick but thorough math before you decide to retire. CNN, MSN, and many other websites have calculators to assist you. If you enter in your age, income, current savings, savings rate, and expected pensions and social security, you will receive an estimate of how much income this will yield when you start withdrawing the money. If you have saved money through retirement plans, don’t forget to account for tax payments you must make on the withdrawals.
If you come up short, you have choices.
•You can increase your savings rate to fill the gap in your remaining working years. This is a more workable idea if you have 10 years left before you retire than if you have one year.
•You can try to have your home and credit cards paid off, if you can do this and still put away money for retirement. Having fewer expenses in retirement will make it easier, but don’t forget to budget in home and car repairs. Unless you plan to drive your same car for 20 years, you may even need another car at some point.
•You can postpone retirement from your current job – a great option if you like what you are doing. If you can work out an arrangement to go part time, this may even give you the ideal combination of money, benefits, and free time you want.
•You can plan for a new career. Whether you plan to start a business or work part time at the local Walgreen’s/WalMart, you can bring new income into the home.
•You can downsize and live more frugally as time goes on. There is nothing wrong with down-scaling your expenses, but if you want to enjoy your retirement, you probably don’t want to take a vow of poverty.
Before you make drastic decisions about financing your retirement, contact a financial advisor to help you develop a workable financial plan. Even if you don’t have all the money you would like to have, you can still finance your retirement through careful planning.
Tracey Fieber
Using the very principles she teaches, Tracey Fieber went from a corporate executive in a financial institution to a retirement filled with adventure, passion and purpose, in less than 8 months at 44 years old! Tracey Fieber is the founder of NewFaceOfRetirement.com and creator of The Secrets to Retirement Success System™, the most complete one-on-one Retirement Transition training program for corporate executives and small business owners in North America. Tracey is known for combining a unique blend of innovative, straight-shooter, nofluff strategies that really work, with an endless compassion for corporate executives and small business owners that are rarely seen together. Her high-energy, get-down-to-business style keeps her audiences interacting and taking numerous notes. Tracey’s motto about planning one’s retirement quickly is, "Why take a long time, I’ve got a life to live: places to go, people to see!" and her unique ability is getting people who’ve never had real success in planning for life stages to take immediate action on a systematic basis to produce a full retirement life they want to live, with more fun, in record time, every time. She is a well known and respected expert on retirement coaching for small businesses and speaks internationally to audiences whose members are looking for more fun, in record time, every time.
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