Retirement planning used to be a simple equation. You work for thirty or forty years until you hit 65 and then you hang up the "dress for work" clothes in favor of the "dress for the links" attire. But there are four simple questions you should ask yourself before making any decision to retire at that target age.
How is your health?
Even though it is tempting to argue that these healthy years are the prime retirement years, without any indication that your health will suddenly fail, keep working until you feel as though it is time to stop.
Recent science has proven that there is only a 3% chance that you will inherit the trait of illness from your parents. That said, any opportunity you have to reverse your lifestyle (i.e .smoking, lack of exercise, etc.) can have an effect on how long you live and how your health is during those extended years.
Granted, those additional years will add to the possibility of outliving your savings, but those additional years of health may add far more to your savings and your estate.
How is your job?
A good, satisfying occupation can be just as rewarding after 65 as before. Think about that when you are 45. I have been preaching the value of job diversification for over a decade now. While this is only one option on the road to job satisfaction, it is by far the easiest to achieve.
Chances are, by the time you reach 45, you will have spent the better part of your adult life in the same industry.
Beginning to search for later year options, utilizing your accrued talents to shape and form a new destiny is both invigorating and challenging. It is just the thing to keep a healthy mind sharp.
What are your plans?
Most folks have ambitious and grandiose plans for their after-work lives such as travel or doing all of the things they have put-off. It is natural to dream of a time when you are not the slave of an alarm clock; not having a schedule dictated to you by others; not having to compete with co-workers for the job with the best perks.
But there are numerous things to consider. Think about the economic considerations of your dreams/plans. Chances are you have taken many vacations by the time you have reached the age of 65. The ability to pay for trips to resorts or far away places will be greatly compromised by your savings. Few people think about savings as a sort of reverse paycheck. You are drawing down yourretirement accounts rather than padding them with constant and steady contributions from your paycheck.
Travel is very expensive. And although this is often the number one reason why folks want to retire the open-endedness of leisure travel the truth is, it is likely to occupy the same amount of time during a given year that it does now.
In many cases, retirees either work part time to offset these expenses or worse, to fill in the huge gaps in time that are now part of the retired life. A good plan needs to consider this. Sixty-three percent of retirees work with over half of those working part-time. While having a plan is extremely important, making a plan that is based on the reality of the situation, while not very appealing now while you are still employed, will allow you to wrap yourself around the notion. The best plan for a truly successful retirement is try an achieve less work.
How much have you saved?
While I have talked about the fact that most folks haven't saved enough to retire (less than half say they have enough to retire comfortably), the more education you have, the more likely you are to continue to work well after 65. Only 60% of those with a high school degree plan to work after they retire compared to 71% of those with postgraduate education.
While eleven percent doesn't seem like a wide margin, the reason for wanting to take a permanent leave from the workplace can be found in the nature of the jobs performed by these two different sets of employees. Often, high school educated workers have been involved in a more physically strenuous type of employment. It may be the strain of those years that makes the attraction of continued employment far less appealing than their higher educated counterparts.
Although the stresses of any workplace can exert a physical demand on any worker, the opportunities to save for retirement diminish as you head down the educational line. The average worker earning the average pay (about $45,000) save a paltry $3,000 in defined contribution plans. This is just over 7%.
If you have saved less than this, you will need to readjust your budget now even if you plan on working longer. It is far easier to pinch pennies while a paycheck is still coming every week than it is when you are dependent on a fixed (retirement)income stipend.
