No matter what you plan to do in retirement, you’re probably looking forward to this major change in your life. But it’s always better to carefully analyze your situation and plan ahead, rather than retiring too hastily and regretting it later. So, if you’re hoping to retire in the next ten years, here’s what you should be doing next.
Determine how much income you will need. Obviously, you will still need some income after you stop working. For most people, assuming they will need about 80 percent of their pre-retirement income is a good starting point. That number might not be perfectly accurate for you, if you plan to downsize your lifestyle significantly or if you hope to engage in some expensive hobbies and travel. But start there, and then analyze what your future budget could look like.
Calculate your annual withdrawals. The “four percent rule” is commonly used to calculate annual withdrawals from retirement plans. According to this rule, you can withdraw four percent of your retirement savings each year, accounting for inflation, and the money should last you for thirty years.
This rule can also be used in reverse. Multiply your ideal annual income by 25, and that’s the amount that you should set as your target retirement savings goal.
Estimate your Social Security benefits. Either by working with your financial advisor, or by creating an online account at SocialSecurity.gov, you can get an estimate of your future Social Security benefits. Keep in mind that if you’re earning more toward the end of your career, this amount could increase the time you retire. Your monthly benefit should serve as a helpful supplement to other retirement income that you establish for yourself.
Adjust your investment strategy. Earlier in your career, you might have invested more aggressively, accepting a certain level of risk in order to do so. But as your target retirement date draws closer, shifting to a more conservative investment strategy is often recommended.
We can discuss the details in greater depth at our next appointment. Just call us to schedule a meeting, and we can evaluate your retirement plan and help you make the necessary adjustments as you approach your target retirement date.