Understanding retirement

Are You Ready to Retire?

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.

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