How Much Do I Need To Retire? Retirement Guide
You find out some weird things as a personal finance writer. Last week was the discovery that ugly people earn less than attractive people.
This week, it’s that there is such a thing as retirement boot camp. They make look nice and sweet but two women in America have been running a retirement preparation course that pulls no bunches. After all, it’s one hell of a lifestyale change. 40 years of your life has been invested in going to work 5 days a week. Suddenly, you have nowhere you need to be. Your savings are dwindling, and no money comes in. The time you’ve always wanted to spend with your partner is now yours and you realise you have to get to know them all over again.
Boot camp lasts a year, and is intended to prepare you. Usually 80% of participants decide to work a bit longer, either because they realise they’re not ready or it becomes a game to be more prepared than entirely necessary. Tara Siegel Bernard got some fantastic tips out of them as to how best prepare for retirement.
Spending
Know what your lifestyle costs. Include every expense for the past year. Once you know that, you’ll know how long you could afford that lifestyle if you have no income and only savings to rely upon. While frugality is an important part of retirement, the first couple of years might involve some additional expenses when you finally have time to travel or put some work into the house.
Net worth statement
Assets and liabilities. Should your vacation home be kept, sold, or rented? Is your mortgage paid off? If it isn’t, the advice is that generally you shouldn’t retire until your free of that rather large, imposing debt.
Insure Thyself
Retirement is a big life change, so what affect will that have on your insurance? Bernard asks whether you need life insurance anymore, if there’s no income to protect? If you’re living without a mortgage, dependents or loans to pay off, she suggests to look again at your policy and have a think about how necessary it is.
Goal Setting
What will your retired life look like? Will you volunteer, travel the world, work part-time at the school canteen? Understand what you would like your retired life to look like, and it will be easier to know how much money you will need to get there and maintain it.
Increase your savings
Firstly, you’ll need as much in your savings account as you can get. Secondly, if you can’t afford to increase your savings, maybe you need to reconsider retiring straight away as there obviously still major drains on your income.
Tax Planning
Know what parts of your retirement income is taxable, and set aside the money. Don’t get stung at the end of the financial year because you’ve never had to save the tax before. There’s no PAYG in retirement.
Charity
Think about donating time, not money, in your retirement. It’s just as precious a resource.
Estate Planning
Review your will. If your children are grown now, you probably don’t need to include who will take guardianship of them but you might want to have one of them as the executor of your will. It’s all the more important that the will is up to date, with such a major life change like retiring.
How are you preparing for retirement?
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