I understand you probably know the definition of retirement. But the key phrase in the definition is the “state of being retired.”
Why is that significant?
Because once you retire, the hope is you are able to stay retired. There are things in life that can either hurt your retirement. Or can actually bring you out of retirement.
For most, the goal is to retire once, and stay retired. I understand that not everyone can fully retire because they like to work, but then it is no longer work. It is now a hobby.
How you can you set yourself up for success and retire once?
The answer is to actually start with a plan!
According to a 2015 study by Transamerica, almost half of baby boomers are determining their retirement savings needs by guesswork.
Only 11% actually used a retirement calculator to figure out what they really need to sock away for their retirement years.
That is like hopping in the car and not knowing what directions you need to take to get to your destination. To make matters worse, you are just jumping in the car and you don’t even know what your destination is!
Here are some key starting points to help determine what that destination looks like:
- Understand your spending habits. You may or may not have a budget. so if you don’t, look at your spending habits. Pull out your last 12 months of bank statements. Determine how much money actually was spent. That will give you a good starting point.
- Subtract your annual pension (if you are one of the lucky few) and annual Social Security income from the annual spend to figure out your gap. The amount you need to make up with your assets.
- Take your spending habits annual total after the deducting your pension and Social Security and as a rule of thumb, multiply it by 30 (the old rule is to multiply it by 25. But I like to be more conservative. Again, the objective is to be able to stay in the state of being retired.) Once you have that number, you have an idea of roughly how much money you need to have saved to hopefully maintain your lifestyle retirement.
Of course, you should get more thorough and have a more structured plan on how to distribute your assets, but at least for now you have a good starting point.
The distribution of your assets isn’t the scary part, it is whether or not you placed your assets in the proper place to make sure you can continue to take distributions for the rest of your life and maintain your lifestyle.
Vincent Oldre a Minneapolis Retirement Advisor
Vincent Oldre is a Certified Minneapolis Retirement Advisor and President of Assured Retirement Group, Inc. located in Bloomington, MN. He and his firm focuses on helping those in or near retirement, maintain their happiness in retirement by helping them put together their needs, goals, and desires into their retirement plan.