This is a question many folks starting to think about retirement will ask. Financial advisors hear the question all the time. This, however, is not just a question about retirement calculators or “am I saving enough for retirement?”.
The entire question of retirement and its timing is about the quality of life during retirement, and indeed your relationship with your spouse and the rest of your family and friends. Success in retirement hinges on your contentment, your happiness, your spouse’s happiness and, indeed, in large part on your financial well-being. But financial calculating is not the entire picture.
Let’s face it, we could all retire whenever we want to. We may not have the quality of life we had in mind, but we could retire and live with our kids or, in the the extreme, retire to a cabin in the woods after getting rid of all our possessions. To be realistic we need some idea of how much we will have in our retirement inventory now and what we will need when/if we retire. In order to do that, we have to set a goal in mind of what we would like our retirement to be like.
Let’s first agree on a definition of retirement – “to leave your chosen career or job and spend more time doing the things you love or have passion for. To relax, not be on a schedule, and do what the heck you want to do when you want to do it”. That’s retirement. (I’d love to hear your definition of retirement – please send it to me in the comments section below).
This website, www.retirementNEXT.com is about all those things – how to plan for retirement, what to do when you are retired, where and how to live, and how to make it financially. There are articles about retirement calculators (the traditional ones), as well as how to choose a retirement home. This article if more about answering the question, how much will I have at retirement ? To answer this, we have to catalogue what we have NOW.
Let me make a comment to the younger future retirees right now. Re-read the definition I just put above for retirement. Indeed if you are not happy in your work now, if you do not have a passion for it, if you do not enjoy every day you get up and out of bed – there is still time to change that today. Right now. If you don’t know your passion, keep looking for it until you find it. Because if you make a living with your passion you will never work a day in your life and you will never have to retire. Remember, it’s only called work if you would rather be doing something else (So, if you are not working you will not have to retire!).
But let’s assume that someday you do want to do something else and you want to retire. You are searching for the optimal retirement planner. Where do you start?
I suggest a retirement Journal.
You may want to go get a black and white speckled composition book, the kind that is bound, and set up sections for your retirement journal. I like the bound kind of books because they are more like diaries and it’s not easy to rip stuff out of it. Some folks buy an accordion file as their retirement file. I prefer the journal idea.
Start by taking inventory. I’m not just talking about numbers that you can put into a retirement calculator, I am talking about a total personal (and if you’re married, a family) inventory. Let’s get past the easy part first and then move on:
List what we have now. In this list I want you to list everything you own, the easy part of the list will be the current value of your bank accounts, cash value of life insurance, stocks, bonds, etc. Then move on to things like cars, antiques, art, real estate, furniture etc. As you sell stuff, or change your mind on something, just draw a line though that item so you can still read it later. This should be more of a living book, not a final list.
On the right hand side of the page, next to the non-money items, put a comment such as “can sell for $500”, or “need to keep”. “What we have now for retirement” pages should be fluid. Sit down with your spouse and discuss what you have now, what you may want later, and the relative benefits of deposing of some items now.
Put a separate page for your primary residence. Take inventory of what you use in your house. Is this the same size house you want your retirement home to be? What does this house have that you can give up? Make room for additional comments here. You may be thinking you know what you want as your retirement home now, but this may change as your circumstances change. Some folks make a separate book or folder with magazine articles or pictures of things they aspire to have in their retirement or second home. This is your journal, make it up as you go along.
What relationships and family connections do you have? Literally list the family and friends that are important to you. Add to this over time. After all you may want to retire and move someplace less expensive or more in tune with your retirement goals, and yes of course you will build new relationships, but many of us will want to keep in touch with the people that are important to us and writing them down will help us think clearly about the future with them. Take special note of your friends and family that are also planning on retirement. Arrange to have discussions with them about your goal and challenges, you may decide to do something together or at least move to the same area.
My parents were the first of all their family and friends to retire to Fort Myers Florida. Within five years I had all my aunts and uncles living in Fort Myers as well. Even though I never lived there until much later in my life, I always felt like I was coming home when I traveled to my parent’s retirement home in Fort Myers from New Jersey or Ohio, where I had my career.
What we want. This list you might want to write in pencil or leave lots of space in the book for additions and changes! I suggest you and your spouse each take some time and jot down your retirement expectations on a pieces of paper in private – without consulting each other, then come together at the kitchen table to record your ideas in your retirement journal. Nothing should be off limits in this list. The idea is to start a discussion about wants, needs, and must haves. Go through the list over a period of time and then eventually prioritize your list. Remember, you haven’t used one of those financial retirement calculators yet, so you or your spouse may not know what you can or cannot afford. What you are trying to do here is ideation – throw it all out there for discussion and feasibility. Gradually get it down to three lists: “Must haves, Wants, and Would be nice”.
At this time it might be too early to set a retirement goal. There is no magic retirement goal planner – but this retirement journal is a good step in that direction. Retirement shouldn’t be a goal anyway – its more or a process, a journey.
How much Money will I need for Retirement. The journal that you prepare will give you a basis for adding facts and figures to the retirement calculators. I wouldn’t use one too early in the process, DO THE JOURNAL FIRST. There are simply too many assumptions you will have to make – such as how long you will live, or what your rate of return will be, how much income you will need to retire with, and what your health costs will be. You will have to estimate your retirement needs and then plan for them. The key to the retirement journal is to help give you some parameters for when you do get to feeding all this info to the calculators, some of the major decision will have to be made first. If you are going to move to a retirement house in Florida, what will your housing costs be? How much money will you have in your pension or 401K?
There are two financial categories that we need to answer. 1. How much money will I have upon retirement, and 2. How much income will I have. Once we get those answers, we need to go to the expense side: Housing, medical, travel, food, etc. You can’t get one with out the other.
How Much will I have at Retirement? Start with what you have now.
The journal is the pace to start.
Good luck and good planning.