Why are some people able to retire long before they turn 65, while others struggle to put enough money away? Contrary to popular belief, it doesn’t all come down to income. Early retirement is a mindset, too. In this month’s Investor’s Edge column, I want to encourage you to begin the planning process now, with a clear vision of your life once you have forty extra hours per week to fill. If you are already on-track, great! Hopefully, this will still be helpful.
Below I provide an “Early Retirement Checklist”. This list should be a good guide whether you plan to retire early, at a “normal” retirement age, or choose to work longer and retire later in life. These critical considerations will help prepare you for an early retirement and your retirement years a success regardless of when you stop working.
EARLY RETIREMENT CHECKLIST
Proper prior planning for retirement includes answering these questions:
1. Do you have a pension? Know if it is a forced annuity or is a lump sum distribution a choice.
2. Do you have a company sponsored retirement plan or an IRA? Maximize contributions to both. Over 50? Make Catch-Up Contribution!
3. When will you take Social Security? 6% compounding tax free from 66 to 70.
4. Will you downsize your home? Relocate?
5. How much do you expect to spend each month in retirement?
6. How will you continue to invest during your retirement?
7. Are you ready? What will you do?
8. Is your spouse ready? What will he/she do?
9. Will you stay in the same state?
10. Will you move in with family?
11. Do you have health insurance? Long-Term Care?
12. Do have an Estate Plan? Who are your Beneficiaries?
There seems to be a never-ending flow of new, often conflicting information addressing retirement planning. Many accepted standards for what percentage of our income you need to save to retire comfortably seem to change from year to year. So many opinions and do’s and don’ts can cause uncertainty and doubt. This lack of clarity causes most people to stress out, shut down, and do nothing rather than risk taking the “wrong” action. DON’T LET THIS BE YOU! Approach your retirement as a numbers game. Know the answers to these questions. They are not right or wrong. The answers (numbers) are yours.
**How much income will I need in retirement?
**How much money will I need to save for retirement?
**When can I retire?
**Will I outlive my money in retirement?
**Do I want to preserve my retirement savings for my estate or spend it in retirement?
Know yourself…. How much income you will need in retirement is unique to you. Most common wisdom today is 70-80% of your current income needs will be needed in retirement. Could be more for you. Could be less. Start with a simple budget. It is the only way you can really know.
I can help. Two common tools I give folks to help plan for retirement, especially early retirement, are my Blackhawk Wealth Advisors Budget Worksheet and my RACE planner. RACE (Retirement Analysis & Cashflow Evaluation) answers those tough, need-to-know retirement planning questions. These are free. Let me know if you would like either, or both. I am always happy to help.
John Gardner, CFP®, CPM®
jg@blackhawkwealthadvisors.com
blackhawkwealthadvisors.com
888-985-PLAN
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