This article centers mostly on retirement planning and what you need to know about retirement Planning. What is retirement planning? The importance of successful retirement planning and transitioning to retirement.
What is retirement planning?
Moving further in this article, I think it will be appropriate to start with an explanation of what retirement planning actually means or all about.
A successful retirement planning involves careful planning around both financial and non-financial areas of your life. Some of the financial aspects includes, making sure that you maintain and faster social connections when in retirement and spend your time in ways that brings you sense of happiness and fulfilment after decades of raising family or working full-time outside your home.
Transitioning To Retirement
Transitioning to retirement could be mentally and emotionally difficult without proper planning. Transition to a life filled with freedom of time and potential lack of structure that you would likely find it's importance to maintain a sense of meaning and purpose in retirement and you may have to redefine who you are as part of that process.
You have to think ahead and visualize what you want your retirement to look like. Then you have to carryout the personal and emotionally planning necessary to make the transition as smooth and worry free as it possibly could be.
The Financial Aspects Of Retirement Planning
As important as the personal aspect of retirement planning are, also are the financial aspects and that is what retirement planning demystified focuses on the financial areas of retirement planning.
There are many important pieces or areas to your financial life that must be considered when planning for your retirement but none of them can be looked at or decided upon in isolation. Proper retirement planning is a cohesive integration of all those pieces, it's putting together a coordinated plan to make the most of your financial resources, so that you can make the most out of your retirement.
You can agree with me that, retirement planning is a dynamic ongoing process which doesn't stop once you reach retirement stage. There are often more planning to do during retirement than there is leading up to retirement as personal and financial circumstances change your retirement plans, we need to evolve as well.
Retirement Planning addresses many topics such as answering the questions below.
1. When can I retire?
2. How much do I need to retire?
3. What do I want to do in retirement?
Social Security And Pension
Deciding when to take social security or pensions.
You can as well checkout the pension plan that works here.
Investments
Determining how best to invest your savings and
1. What type of accounts?
2. What type of investment?
Spending Plan Or Expenditure
Creating spending Plan to make the best use of your nest egg.
Health Insurance
You have to decide on healthcare and medical insurance options both before and during retirement.
Housing
You also have to make a housing decision such as whether to downsize to a smaller home or consider buying or renting a second property.
Other Insurance
In other insurance, you have to make sure that, you are properly protected against any unforeseen legal or medical risks.
Estate Planning
Ensure you have in place a proper estate plan for yourself.
Tax Planning
Above all these mentioned is, careful tax planning as virtually every aspect of your financial life has tax implications. After all it is not what you get but what you keep.
Tax minimization should always be incorporated into every step of proper retirement planning.
When can I retire?
This is one of the questions mostly asked by someone intending to retire. It is a quiet a difficult question which doesn't have a direct answer. But with the following points I will be unveiling below, you will find out if it's the right time to retire or not.
NOTE: This is not in any way a financial advice, you can always reach out to your financial advisor in your area.
When can I retire? Or Should I retire now?
Below are the framework or some questions which will assist you to decide if you should retire. By answering this five (5) questions yourself, it will definitely help you to know better.
Although, this article is not about the financial question of whether you can afford to retire. That is another entire conversation, although I will say in my opinion that many people can afford to retire earlier than they think they can and broken financial models have people spending less than they could.
These are the questions you should ask yourself to decide if the time is right to retire.
1. Does it worth trading my time for more financial resources? There was a book released in the 1970`s which titles "Your Money or Your Life" . In this book the author or writer said that we exchange money for life energy. There is a quote from this book, which says our life energy is our allotment of time here on earth, the hours of precious life available to us.
When we go to our jobs, we are trading our life energy for money, you can even say that our money equals our life energy. The question you need to ask yourself now is, am I trading my life energy for something that is truly valuable? But that does not mean you shouldn't work or that you should retire now.
It simply means that, you should ask yourself are the financial resources that am accumulating, is it more than enough? Is it really how I want to be spending my life energy and my time here on earth. We all know this truth, that our time is finite.
There will be more money and there will not always be more time, so just beginning to sort through like, does it really worth trading my time for more money? At this point there's diminishing returns, it doesn't make sense to exchange more of your time for more money.
2. How is my health?
The second question you need to ask yourself when answering this question of, "When can I retire?" Is, how is my health? As we begin to age our bodies begin to fall apart. Imagine someone who runs a far distance within an hour or less perhaps in the near two to five years, such a person cannot be able to accomplish or cover such distance within that timeframe. If the person does or tries it, he or she might end up in a hospital bed.
So going by the question, how is your health? There are few components to this question. The first piece is, as your health begins to decline, you just have a shorter window to do all the things that you dreamed of doing in retirement, such as traveling, going to see your grandchildren and all those things you really care about.
If your health is beginning to decline, that may speed up the timeframe that you want to retire.
The second piece is just keeping your health up takes a lot of time and energy and if you're spending all of your time working to accumulate resources that you may not even need. You may not have enough time to spend on working out, stretching, fixing healthy meals and all the things will keep your body in the best shape possible so that you can enjoy your retirement to it's fullest.
So one of the question that you need to ask yourself is, how is my health and related to that, do I have enough time and energy to really focus on keeping my body at peak performance, so that you can be able to accomplish those things you've dreamed of in retirement.
3. Are my spending quality time with my friends and family?
Many studies have shown that one of the biggest indicator of long-term health and long-term life are valuable relationship and they are important relationships in social networks. But if we spend all of our time working, we often don't have the we needed to invest in friendship, family and those social ties that are so important especially as we age.
If you don't have the time and energy to invest in friendship, family and all those things that make life worth living. Then that might help you answer the question of you know what, it might not be worth continuing to work, sure you might have little more money in retirement or leave a little bit larger legacy to future generations.
It is important that you invest the moments that you have now in spending time with these people maybe you won't leave them as much money at the end of your life but you will be able to enjoy and strengthen these relationships today.
4. Does my job give me life? Or are you happy with your job?
What's your answer to the question above? If your answer to these questions is no, my job does not give me life or am not happy with my job, then that might help you answer the question of, it might be time to retire or it might be time to pullback If you have the option to work few hours, begin traveling again easing your way into retirement.
While some people, they love working, it gives them life and vitality, they are able to do all the things they really care about and continue working. If your job does not give you the time and the energy to focus on other things that are valuable, it might be the time to retire or at least begin to ease your way into retirement.
5. What am I retiring to? Or What do I do in retirement?
Many people retire just because they hate their job or they are no longer comfortable with their job. However, once they finally retire, waking up on a Monday morning and realize they don't have the idea on what to do next, infact depression is a huge issue amongst many retirees because most of their life, purpose and validation comes from the job they do.
Then all of a sudden one day you wakeup and don't have job any more and all those things that gives you purpose and validation are gone and you don't know what to do next. The question you have to wrestle with is, do I know what am retiring to, do I have a plan for retiremen? The goals and dreams going to spend a month, a year with my family.
Am I going to go for hiking, traveling or whatever the things might be, you have to make sure you plan it out, if possible write it on paper and pretend like it's a business plan.
Finally, create your retirement plan not just around the financial numbers, although you have to figure it out as well but around the actual goals and objectives and what actually you are going to do.
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