Ah, retirement. If TV commercials are to be believed, you’ll spend it taking long walks on the beach dressed all in white and frolicking in slow motion with well-behaved grandchildren. But wait – who’s paying for that beach house and all those white linen shirts? You, that’s who. Are you ready to retire? It’s a big question, and not all the answers are financial. Since this is a Money Moment, though, let’s start with the finances.
- Are You Money-Ready? Do you have enough to retire? You can use this online retirement needs calculator or follow our formula:
- [Use this benefits calculator from Bankrate.com to estimate your annual social security benefits]
- Why 25? It’s based on the 4% rule, which says you should withdraw about 4% of your retirement savings each year. 1 divided by 4% (.04) is 25. If you don’t like math, just trust us – it works.
- An example: If you wanted to have $60,000 a year to live on during retirement (A) and you expected $35,000 a year in Social Security benefits (B), you’d need to finance $25,000 a year. Multiply that by 25, and your total retirement nest egg should be $625,000.
- Making it Easier: If your end number is a lot more than what’s currently in your retirement fund, here are a couple things you can do:
- Retire Later: The later you start taking Social Security benefits, the more you will get annually, and the more time you’ll have to add to your savings.
- Work Part-Time in Retirement: You can add to your income with part-time work. Just be careful: if you retire before 67 and make too much part-time income, you could lose some of your Social Security benefits. After 67, this rule no longer applies.
- Seek the Help of a Financial Planner: A financial planner can help you make the most of your investments in the years just before retirement. Visit our Wealth Management page to learn more.
- Are You Mind-Ready? Retirement isn’t just a really long vacation. It’s a whole new lifestyle, and the transition can stress you out. Don’t believe it? A recent study found that people who retire are 40% more likely to have a heart attack or stroke than those who keep working, with the peak risk in the first year of retirement. Consider these questions:
- How Important is Work in My Life? If you define yourself by your job, you may struggle to adjust to retirement.
- Do I Have Outside Interests? If you have passions you can’t wait to pursue, and people you want to spend time with (who aren’t co-workers!), you’ll have a happier retirement.
The official retirement age (67) is just a guideline. Some retire early. Some have to be dragged by the heels out of the office as they clutch desperately to their desk chairs. Do what works best for you.