This post was originally published on this site.
1. Clarify your retirement goals and income needs
First, the fun part. Start by picturing your ideal retirement.
- Where do you want to live?
- How will you spend your time?
- What activities will bring meaning to your life?
“Talk with friends and family for insights and ideas,” says Fidelity Investments vice president and financial consultant Ryan Viktorin, CFP, stressing the importance of preparing both emotionally and financially.
“I ask clients to think about what they learned from retirement through their parents’ eyes,” she adds. “How did they see their parents experience this time in their life?”
It’s time to run the numbers once you’ve defined your retirement vision
“Get a sense of what that lifestyle will cost,” says Viktorin. “Then look at what your income sources are, such as a pension, Social Security, annuities, dividends, and interest.”
Having a clear income plan is one of the most important steps to feeling confident about retiring. Fidelity suggests using 3 building blocks:
- Guaranteed income (annuities,1 Social Security, or pensions) for essential expenses
- Growth potential to help your money last
- Flexibility to adjust when needed
Using sources of guaranteed income to cover essential expenses can help ensure necessities like housing, health care, transportation, and food are taken care of.
Savings and retirement accounts can help you pay for nonessential expenses and invest for growth potential. This approach gives you flexibility to scale back withdrawals if the market stumbles.
Assistance from a financial professional can be helpful in planning your retirement income, Viktorin notes.
By doing the math 5 years before you call it quits, you’ll have time to make any needed adjustments, such as scaling back on spending, ramping up savings, or finding ways to boost your income, like negotiating for a raise or taking on a side gig.
And here’s a potential upside to doing this due diligence: You might discover that you’re in better shape than you thought. “Maybe you can retire early,” says Viktorin.
Tip: Be sure to consider health insurance as well. If you do retire before age 65 when Medicare eligibility begins, health insurance coverage could be an added expense.