With a simple browser search, you can find thousands of surefire formulas for retirement success—everything from how much should be in your wallet to how old you should be when you leave the workforce.
Of course the internet doesn’t know you. (Even though it sometimes seems like it does.) While the information it provides can often be helpful, especially when it encourages preparation and not panic, all of those theories and rules of thumb are just a starting point for retirement planning.
There is no single solution for when to retire or an online calculator that can give you a truly accurate answer to one of life’s most important decisions. Would you take a 10 minute quiz to decide when to get married, buy a house or start having children?
I’ve spent years helping people plan for retirement. I even wrote a book about it titled Retire NOW (not when others would) (opens in a new tab): A complete guide to retiring on your schedule. One important thing I’ve learned is that knowing when you can (and want to) retire is each individual’s unique decision. It takes time and effort to get it right. It also means asking some personal questions, including:
- What do you still want to do with your life?
- How does your spouse feel about retirement?
- Where do you want to live when you retire?
- Are you hoping to travel, pursue new hobbies, work part-time or take care of your grandchildren?
- Do you have aging parents or a special needs child who may need your help as they get older?
- How healthy are you? Do you have a family history that puts you at higher risk for health problems?
The list could go on and on. And financial matters can be just as complex.
- What will he do your income needs to be retired?
- How long will it take you to take care of the basics and feel comfortable with respect to achieving all of your retirement dreams?
- How might your income needs change over time? Will you need more for your active 60s and 70s or more as you get older for health and long-term care issues?
- Where will your income come from when you no longer receive a salary? Besides yours Social security benefits and your retirement investment savings, will you have a pension, rental property, or other income stream that you can leverage?
- What will your retirement income look like when combined with your spouse’s contribution? If you’re out of debt and planning to downsize, maybe you don’t need a $2 million portfolio or 10 times your annual salary in savings, whatever the internet says.
Of course, all of this planning and number crunching takes work, even when (and I highly recommend it) you have the help of a financial professional. This is why many people don’t care.
But putting together a written retirement plan—whether it’s a do-it-yourself job or prepared by a professional—is truly your best hope of achieving your long-term goals. And it should cover different types of planning, including:
- An income plan built to last through a long retirement. You can start by finding ways to do this maximize your reliable income streams to cover daily expenses. But don’t forget to fund the occasional splurge and, of course, contingency or emergency costs.
- An investment plan that helps you reduce your risk while continuing to work towards your goals. If you’re nearing your desired retirement age (perhaps five to 10 years away), it’s a good idea to stress test your current portfolio, evaluate your risk tolerance go ahead and switch to an asset allocation that can protect your hard-earned cash from volatility and inflation. If you haven’t already, this is when you may want to consult a financial professional.
- A tax plan that keeps your tax burden as low as possible right now, but also in retirement. If you’ve been hiding all of your money in a 401(k) or similar tax-deferred work plan for years, you might want to consider convert some of these funds to a Roth IRA or some other tax-free income strategy.
- A health care plan that works for your individual needs. If you retire before age 65, you’ll want to find the best possible insurance plan to fill the gap after you quit your job but before you switch to Medicare. And if you’re approaching age 65, it’s a good idea to seek professional advice when choosing Medicare coverage.
- A long-term care plan that protects your health and your assets. Many people put off this aspect of retirement planning, but getting older in America can be a costly endeavor. The sooner you start reviewing your options (whether it’s traditional long-term care insurance or one of the newer alternatives out there), the better.
- A plan for the surviving spouse. If you’re married, every aspect of your retirement plan should answer the question: What happens when one of us dies?
- A legacy plan for your loved ones. If it’s important to you, your plan should include strategies for ensuring that what’s left of your nest egg goes to your family and favorite causes without becoming a tax burden or probate nightmare.
If you’re still several years away from retirement, some of these topics may be difficult to think about, much less plan for. But even if you’re just starting to plan, keeping your ending in mind is important.
What does a successful life and a fulfilling retirement look like to you?
Kim Franke-Folstad contributed to this article.
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