When should I retire and how much should I have saved are among the most common questions people have when they think about retirement. However, the reality is that there is no one specific solution or answer. When planning your retirement, each person’s assets, needs, goals, and risks must be taken into consideration. A sound retirement strategy doesn’t focus on isolated decisions; instead it looks at the comprehensive retirement income plan.
There is a general idea that retirees need to have $1-2 million saved for their retirement, or 10 to 20 times their current income. These are rules of thumb that can serve as a guideline for planning retirement savings, but they aren’t necessarily realistic, due to market fluctuations and other factors. What is important is estimating your expenses and looking at all of the assets you will have at your disposal, not just investment assets. Look at Social Security, your home equity, life insurance, pension, 401(k), and part-time work after you retire. When planning your retirement, focus on all of your income sources, not just accumulated investments.
Even with their financials sorted, many people still find themselves asking, when should I retire? Most people start looking into retirement in their early 60s, though some businesses offer early retirement incentive packages for those even in their 50s. While some early retirement packages may seem appealing, it is important to make sure that you have the funds to last those extra years, especially if you will be taking Social Security right away, as well as the extra health care costs. Even if you can afford early retirement, you need to make sure you are mentally ready. Many people get a sense of self-worth from their career and may feel lost without their job.
The key is to take a comprehensive approach to retirement. Don’t think just about money or age. Think about how each area impacts the other, including quality of life and making the most of your retirement while you’re still healthy and active. Rules of thumb are handy guidelines, but it is important to have a far-reaching retirement plan that takes all issues into consideration.