I’ve seen many clients, both friends and family alike, all with the goal of retiring with a plan.
1. Take inventory
The first thing you need to do is take an inventory of your assets, retirement benefits (including social security), as well as list obligations you might face (healthcare, long term care, education funding, weddings etc).
2. Find your monthly paycheck
Add your investments that will be invested in a diverse portfolio (stocks, bonds, real estate, managed futures, etc), take that amount and divide it by 20. This is 5% of your portfolio, and an amount that many financial planners recommend taking to have your money last for the rest of your life.
Once you get that number, add your social security, pensions, rental income, or other residual income you expect to last for the rest of your life.
This is your allowance in today’s dollars. Make sure you have inflation protected assets making up a significant portion of your portfolio such as stock, real estate, tips, etc.
3. Clear your debt
If you are retiring you should be debt free. This will limit your obligations, and allow more flexibility in retirement.
4. Take a test run, financially
Once you have your monthly income, only use that amount of your income for 2 years. Are you comfortable with the lifestyle? If you are not, every $20,000 you save will add $1000 per year extra.
5. Preparing for retirement emotionally, staycation style
Take one week off of work and have no plans, don’t catch up on past projects, and make sure your significant other is with you. How does it make you feel? Are you more relaxed, or more stressed from getting out of your routine? Do you have friends and family around? By the end of the week you will know if you are ready to leave or not.
6. Plan your days
What are you going to do on a daily basis? Are you planning to travel? Volunteer? Many divorces occur in the first 2 years of retirement, make sure you take time to compromise and understand the goals and wishes of your partner. Having a nice guideline in place for retirement activities will not only allow you some type of order, but also many things to look forward to.
Don’t forget to have fun and relax—after all, you’ve earned it!