When can I retire? We get this question from many people and the answer is always different. To help with this challenge, we have developed three simple steps to get you started.
Step 1
What are your current income and expenses?
When estimating your current expenses, keep it simple. Just take the most recent three months of bank statements. This should give you good idea of what you’re currently spending on household expenses, phone, gas, food, car, etc. Add 3 months of bank statement withdrawals. Then divide the total by three. This is what we call a “living budget,” because it includes actual spending.
With this calculation, you should have a good idea of your current monthly expenses.
Step 2
When will your retirement income meet or exceed your current income?
Now pull together all your retirement income and assets including what your monthly Social Security will be, plus pensions, 401K, 403b, mutual funds, Roth, savings account, etc. Get a total of your assets.
Work with your retirement planning team to realize what you can do with what you have. Get help!!! This is a critical step in your retirement years and one mistake can cost you a major portion of your retirement principal. Retirement income planning is more about managing cash flow from your life long savings than becoming debt free. Being debt free is always a goal, but in reality it may not be possible due to the high costs of living today. That’s okay, everyone’s situation is different, and your retirement income plan will be too.
Step 3
What’s the target date you want to retire?
Most folks have a good idea of when they want to retire. So use that date to start. Many folks agree that when your retirement income meets or exceeds your retirement expenses and has a provision to adjust for inflation, you can retire.
With these 3 areas being defined, we can now start to move dates and assets into a master plan and know exactly when and how you will retire and with what.
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We are not a government resource nor do we provide legal or tax advice. We make understanding Retirement Income Planning 123 Easy.
