Posted on: 30 June 2019
Whether you're hoping to exit the rat race within the next couple of years or are just daydreaming about the day you can put in your final two-week notice, you may be wondering how you can know when it's financially prudent to retire. Unless you want to spend your golden years pinching pennies on necessities and worrying about having to return to the workforce, it's important to delay your retirement until you're certain you have the tools to generate a stable source of income that can more than cover all your expenses. But with so many contributing factors, how can you know when you've reached this point? Read on to learn more about three crucial tools you can use when planning your retirement.
Online Retirement Calculators
You don't necessarily need to see a financial advisor in order to determine whether you can afford to retire. There are a multitude of online retirement software and calculators that can account for everything from future Social Security and pension payments, to an increase or reduction in your annual spending over time. Because different calculators seek different input data, using a variety of calculators (and a variety of assumptions) can give you the most holistic picture of your future finances.
Current (and Future) Budgets
Even if you have a good handle on your invested assets and know what your pension or Social Security payments are going to be, if you don't have a working budget at the moment, you're only working with half the picture. Adjusting to life without a paycheck can be tough even for the most prepared retirees, and maintaining your pre-retirement spending level without knowing where your money is going can lead you to draw down your retirement assets more quickly than anticipated. Tracking your spending for a few months, along with calculating which expenses you'll lose in retirement (like dry cleaning or commuting costs) and which you'll gain (like health insurance premiums), can help you ensure you have sufficient income to retire. And if the term "budget" is too much like the word "diet," consider it a "spending plan" instead.
While the thought of spending your lunch hour sitting through a retirement seminar may not sound like the most thrilling way to spend a Thursday, taking advantage of in-person retirement workshops can not only keep you up to date on the laws and regulations governing retirement accounts, but help you connect with others who are preparing to retire or who have recently done so. Having the camaraderie of those in a similar stage of life can be invaluable, and as these new connections leave the workforce, you may be able to learn from their experiences rather than make mistakes on your own.Share