Read This If You’re Planning To Retire In Five Years
Retirement planning should ideally start in your thirties so that you can save enough money and manage your income in a easygoing manner to have everything covered hassle free. However, the last five years before you actually retire might be the most important years in terms of your final retirement planning.
In these years you should realize if you can really afford to quit work. The final decision will definitely be affected by the amount of preparation you have previously done, and how well you stuck to your retirement plan. If everything went according to your program, then you will be financially prepared for retirement and you might just have to continue what you did in the previous years.
On the other hand, you might feel that you are not really financially prepared, which will require some additional modification in order to get you to the retirement status in 5 years. Let’s see what are the factors that you have to take into account to get a realistic determination of how much you will need for your retirement.
How Long Will You Be In Retirement?
The goal of this determination is to realize if you can afford to retire in half a decade or not. Well, this question might seem a bit weird to you, but actually you should make a presumption of how long are you going to live. Of course there’s no exact way to be sure of the period of time you’re going to live, but you can make a reasonable estimate at least. Based on your family’s general level of health you should be able to guess the average age people in your family tend to reach. This might be the most important
Do You Need To Insure Your Assets Against Illnesses?
Life expectancy isn’t the only factor you should take into consideration when determining whether you’ll be ready for retirement or not.
Your family’s health history is also important in order to predict how much money you need in order to be financially ready for retirement. If your relatives have historically been prone to some long-term illnesses it might be wise for you to consider insuring your retirement assets. Having to pay illness or disability-related expenses from your retirement savings, might drain your nest egg really quickly. It is better to stay on the safe side and pay for long-term care (LTC) insurance if you think you might be more prone to developing certain illnesses.
What Will Your Expenses Be During Retirement?
This should be one of the easiest parts of the readiness analysis you should do before finally retiring. Make a list of the items and events that might cost you money in the following decades and determine approximately how much will they cost you. You should also take in account the expenses that will no longer apply, so eliminate gasoline costs you spent on commuting from and to work, and add the items that will become your new expenses during retirement. For instance, your home utility bills might become higher or you might want to employ a caregiver at some point.
Establish Your Predetermined Income
Try to estimate the income you will receive that is already guaranteed. You can get an estimate of your Social Security benefits at the Social Security Administration website. Your predetermined income should include the pension income earned from your current and former employers, and the Social Security income.
Your income might also come from sources like property, be it real or intellectual. Make sure you include all real estate, royalties and rental properties into consideration.
Once you have taken all the projected expenses in account, you might now realize if you are ready for retirement or not. If you are ready, you will just need to maintain your current program and you will be able to retire in 5 years. If you are not financially ready, you might have to do a couple of changes in the next 5 years that might make retirement more possible and stress-free.