Retirement: How Will You Know When You're Ready?

For older generations, choosing a date to retire was a lot less complicated. When you turned 65, you typically said good-bye to your coworkers and left work behind. Today, many people stay in the workforce past age 65. If you're nearing retirement age, answering a few questions may ensure that you're adequately prepared for the future you want.

What's Your Timeline?

You may enjoy your job and want to keep working for several more years. Or you may want to retire early so you can travel or pursue hobbies or move closer to family or friends. Figuring out your timeline is the first step in preparing for retirement. Remember, though, that health issues, layoffs, or inadequate savings may cause you to retire sooner or later than you planned.

What Will Your Budget Look Like?

Figuring out how much you’ll spend during your retirement years can be challenging. Look at each item in your budget and estimate how much of your retirement income it will take. Some items, like commuting costs, probably won’t appear in your retirement budget, but others, such as travel or hobbies, might take their place.

Where Will the Money Come From?

How much of your retirement income will come from Social Security, personal savings or a pension? The more income you have from these sources, the less you’ll have to withdraw from your portfolio. If you plan to work after you retire, estimate the amount you can reasonably expect to earn.

What About Health Insurance?

If you’re 65 or older, Medicare will be your primary health insurance once you’re retired. However, you’ll probably want to purchase a supplemental insurance policy to help with costs that Medicare doesn’t cover, so include the monthly premium amount in your planning.

Have You Considered Taxes?

Remember that all investments aren't the same when it comes to taxes. Consider the tax treatment of your particular investments when you're estimating your expected income.