How do I define retirement?
Being able to stop working and still be able to live at the same standard, or at least very similar or better than you are currently living. Perhaps take some of those trips you had been planning your whole life.
The problem for most people is that they do not begin thinking about or planning for retirement until they are hitting their late forties or early fifties. When you begin planning this late it takes a big hit on your current standard of living in order to save the amount of money necessary to maintain the same lifestyle you are currently living at.
There are tons of retirement calculators on the Internet, but just doing some simple math it’s easy to figure out how much you would have to save to supplement any social security or company retirement you might receive. Simply, take your current annual salary and multiple it by the number of years you hope to live after you retire, and then add on about ten more years for a safe cushion, because most people are living much longer now days.
So, let’s say you plan on retiring at sixty-six-years-old, and plan on living until you are seventy-nine. Let’s add on the additional ten years, making your age approximately eighty-nine-years-old before you may pass away. If your projected social security benefit provides for approximately $28,000 per year at age sixty-six-years old, and your making $90,000 now, you would simply subtract $90,000 from $28,000, leaving $62,000. If your current age is forty-eight-years-old that leave you eighteen years to save $1,426,000. That doesn’t account for inflation either. That equals a little over $79,000 per year. Are you going to be able to save that much money per year on a $90,000 salary? I doubt it.
To define retirement under those conditions would not look pretty. Why, because very few people, have the discipline or the means to come even close to saving that much money based on a salary of that much money.
If you’re lucky enough to work for a company that offers a retirement program, whereby they offer a percentage of matching funds, it would potentially make it more doable. However, most of them only match up to around five percent of your salary. Therefore, that would mean you would only be able to match around the first $4,500 dollars of your wages saved putting your total saved at approximately $9,000 a year (You place $4,500 and the Company places $4,500 equaling $9,000), leaving you about $70,000 short per year (Needed to save per year is $79,000 minus $9,000 equals $70,000).
If you’re lucky, I guess you might have a very rich relative that might be leaving their wealth to you. I don’t, and I would not depend on that in your case either.
The point I am trying to make as clearly as possible, is that you need to start planning on your retirement at the very earliest part of your life. Don’t wait another moment before you begin planning for retirement. Listen to all those older people around you that are telling you that retirement will sneak up on you before you realize it. It does!
Other ways to lessen the amount of money you need for retirement is to eliminate as many bills as possible. In other words, become debt free, if possible. Payoff your automobiles, RV’s, credit cards, house if possible, school loans, etc. This will allow you to define retirement in a positive way lot easier. However, please keep in mind that cars wear out, so if you live another twenty-three-years after you retire you may need another vehicle even if the one you had was brand new and paid off when you retired.
Another option at retirement, or sometime after retirement, is to down size from your current residence and move into something smaller and less expensive. So, as an example let’s say your home is worth $500,000 dollars and you only owe $280,000 on it. If you sold it and bought a small residence for the amount of profit you made you would only have the expense of property tax and insurance. You could also consider a reverse mortgage, but I am not a fan of those, but I must confess I do not know enough to make a recommendation for or against.
Finally, how will you define retirement once you actually retire? What will you do with your time? Do you have hobbies? Remember, you have spent the last forty to fifty years getting up and going somewhere every day. You might have not enjoyed it all that much, but it kept you busy. So, what are you going to do? Sure, it might seem like a great idea to wake up late, grab a cup of coffee, read the paper, watch a little television, take a nap, but at some point, you will become bored. Yes bored! Therefore, if you don’t have a plan, make one. Get involved at your local Church! Feed the homeless! Help out the Red Cross when a disaster strikes.
At the end of the day I define retirement very simply. I can do whatever I want as long as it is legal. But that takes a plan that begins long before actually retiring!
Thank you and may God bless you!