Can You Afford to Retire?

Retirement looms on the horizon out there, somewhere, for each of us. Are you ready for retirement today? If not, when do you want to retire? When CAN you hope to retire? And what can you do NOW to assure that satisfying lifestyle you want and deserve? Take a look at the Social Security Retirement Planner and you will find a myriad of variables that go into evolving a successful retirement strategy. Within that list, there is one consideration generally first and foremost.

When Can I Afford Retirement?

So you are contemplating exiting the working world to take on the full time challenge of entertaining yourself and your spouse for the rest of your lives. You want to be mentally, emotionally and financially prepared for the many significant changes across all aspects of your life.

So what about the money? Running our of money is a common retirement fear. Start creating your financial strategy by putting on your budgeting hat. Your goal is to figure out how much money will you will be spending compared to how much money will be coming in.

First some good news – some of the expenses that occupied your pre-retirement budget spreadsheet are no longer! Take a look at how your retirement expenditures will change in retirement:

  • Mortgage – ideally at this stage, your home is paid off. If this is not the case, the likelihood is that you are living in a smaller house or condo which reduces your monthly payments.
  • Education – the kids are outta there and on their own (hopefully…) so this debt is paid in full
  • Car Payments – you own your car(s)
  • Retirement savings – you are no longer putting money into this fund
  • Commuting – a thing of the past

All of this helps with your bottom line. However there are basic costs that you will still bear. Some estimates are 70% of your pre-retirement salary each month go to meet your living expenses.

  • Food – you gotta eat. Track your monthly expenses for a few months to determine a baseline amount.
  • Medical – part of aging, these will be with you for the duration. Be sure to track your monthly prescription expenses. Here is a link to Medicare prescription coverage details.
  • Travel/entertainment – you will want to do more of this now that you are retired so be realistic in setting the amount
  • Gas (maybe an electric car in your future!)
  • Utilities – phone, electricity, internet
  • Insurance – car, home, health
  • Outstanding loans and financial commitments
  • Lotto tickets

On the flip side, you need to take a look at your sources of income which include:

  • Social Security – according to the Social Security Administration, SS benefits account for 39% of a typical retiree’s income. Start by estimating your Social Security earnings based upon when you retire. The longer you wait before starting to receive your benefits, the bigger your check – you can start receiving social security at 62. But if you do, there is an earnings cap – in 2010 dings you $1 in benefits for every $2 you earn over $14,160. When you reach the age of full retirement (65-67) you can earn as much as you want without impacting social security benefits.
  • 401k, IRAs, pension funds
  • Investments – dividends from stock, bonds, CDs, annuities, etc.
  • Continuing work – part time, internet-based, consulting, etc.
  • Other income – rental units, etc.

If there is one category of blog that is more widely represented in the blogsphere than any other, it has to be financial. There are banks, investment institutions, insurance companies, government sites, and individual financial planners with broad knowledge and experience in all things financial. They are good resources.

Discussed above is a basic exercise, a broad brush stroke in the painting of your retirement landscape. You need more planning, research and experienced advice to provide for your eventual peace of mind. But hey, you need to start somewhere…

Don’t forget to pick up a free copy of my Navigating the Retirement Jungle, available upon request by mailing to lovebeingretired@hotmail.com.


5 thoughts on “Can You Afford to Retire?

  1. Pingback: Retirement – can I afford to retire? (via Retirement – only the beginning) « Newvine Growing — exploring evolution, revolution and living life intentionally

  2. Great post! You’re right…gotta eat. 😉
    My husband, who is ready to retire, was happy to find out that with the new health care reform, there is medical coverage available to him if he didn’t get employer-sponsored health care, is not yet old enough to obtain Medicaid, and/or his wife wasn’t able to cover him. Because we are hoping to move out to the country. Professional jobs are scare and will leave me self-employed. So, its nice to know one of us will be covered! LOL.

    Luckily, our cars are paid off. The mortgage is real low. But… the kids still have college expenses. Hmm…

  3. I love the retirement analysis and suggest readers not wait until they’re mentally ready to retire to start consindering how close they are. You may be financially ready to “retire” before you know it.

    But it doesn’t mean you have to sit on the couch all day! If you’re financially ready to retire, maybe retiring isn’t your preference, but that career switch to something you truly love may be the right move for you.

    Great post.

    • Exactly Nick. There is nothing that says you cannot pursue a passion after retirement that generates a little cash as well. The trick is to do it because you love it, not because you have to do it.

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