Making retirement a reality series: Part one
How do you define retirement?
What does retirement mean to you? It might come as a surprise that retirement has two facets: retirement is a state of mind as well as a financial issue. So whether retirement is around the corner or down the road, it is important to know what it means to you.
Answer the following questions to help you decide what this new stage of life will look like:
- Do you want to travel, and if so where?
- Do you want to live in a retirement community or near family?
- Will you work part-time, volunteer or both?
- What might your health look like at that time?
- If you cannot care for yourself do you expect family to do so?
- Do you want to retire earlier or later than normal retirement age?
Answering these questions is vital as they will help you determine how much money you will need for the retirement you want, as well as how much you will need to save between now and then. For example, if a person wanted to retire early and had no plans of working even part-time in retirement, they would need to save a larger nest egg than someone who chose to delay retirement. This is because they will need to live off of those savings for a longer period of time.
Once you have an idea of what your retirement will look like, now you need to estimate how much it will cost for you to retire and how much you will need to save each month to achieve that monetary goal. Many people over look this step which is critical in adequately saving for retirement. For assistance with creating a monthly budget (i.e. spending plan) and developing financial goals visit Michigan State University Extension. There are a variety of resources to help you calculate an estimate of how much you will need to save for your retirement: i.e. worksheets, software programs, online resources such as the Ballpark E$timate®, and reputable financial planners or advisors.
The next article in this series will address “How much will I need for retirement?” For a variety of financial resources, including how to assess your financial health visit Michigan State University Extension. In addition, Michigan State University offers money management and homeownership classes. For more information about classes offered in your area visit MI Money Health.
Other articles in this series: