If you want to enjoy a comfortable retirement, a plan is essential. Without proper preparations, a successful retirement may be out of reach. Here are five ways to tell if your retirement plan is on track.
1. What does a successful retirement look like to you? Not everyone’s vision of a successful retirement will look the same. A financially successful retirement might mean having a nest egg worth $1 million or it might mean having income diversity. You should envision other aspects of retirement as well. Consider what you want to do, whether it’s volunteer work, travel, a hobby, or just sitting on your front porch. Then determine the kind of money moves that will help you get there.
2. What expenses are you likely to have during retirement? Consider how much your retirement dreams will cost. You can look at this as a yearly cost, or break it down into monthly expenses. Remember to include health care costs in addition to the living expenses you expect to have. If you plan to take up golf during retirement, do some research about the costs related to that hobby. You can use your expenses today as a starting point. Try an online retirement calculator that can help you estimate your retirement costs.
[Visit the U.S. News Retirement site for more planning ideas and advice.]
3. Will you be out of debt? One of the biggest barriers to a successful retirement is the presence of debt. You want to be able to have as few financial obligations as possible in retirement. Look at your financial situation right now, and then figure out a plan to pay down as much of your debt as you can before you retire. The fewer encumbrances you have on your income, the easier it will be to finance retirement.
4. Where will your income come from? Tally all your expected sources of retirement income. Remember to include Social Security benefits, retirement investment accounts such as IRAs and 401(k)s, pensions, taxable investment accounts, and any other income sources you have. Social Security is a starting point, but most people will also need other sources of income. Building up a retirement account, investing in dividend paying stocks to create an income portfolio, starting a business, or creating a work that will bring you royalties are all things you can do to drum up a little more income.
5. Do you have a plan B? It would be nice if everything just fell into place as planned. However, retirement doesn’t always happen exactly the way we expect it to. It’s not fun to think of what could go wrong, but you should consider possible problems and how you might resolve them. Consider whether you could move in with your kids if you needed to and how you would handle long-term care if it became necessary. Also, make sure that your retirement portfolio and income is sufficiently diverse so that you can survive a setback.