Approaching Retirement? Can You Answer These 6 Questions? (2024)

Retirement provides a chance to enjoy the fruits of one’s labor. However, pleasurable retirement requires proactive and thorough planning. With this in mind, we’re going to go through six questions everyone should ask as they approach the end of their life as a working stiff (full time, that is). Answering these questions for yourself should help guide your ongoing retirement plans.

Key Takeaways

  • You should calculate the amount of money you will need to achieve your goals.
  • If you live in a major urban area, you should consider moving to a less expensive place.
  • Your house may be your most valuable asset, so selling it and downsizing your living arrangements could make sense.
  • You should make an estate plan, so that you have peace of mind during retirement that your heirs—and you if needed—will be properly looked after.

1. Retirement: What’s the Grand Plan?

Some people dream of buying a boat when they retire, while others are content to spend their days on the golf course. Still, others want to travel the world. Before you get too far ahead of yourself in thinking about how you will save for retirement, you need a goal. It’s thus crucial to first decide what you’ll want to do in retirement. Once you know what your dream is, then you can begin making it happen.

For example, if your dream is to wake up in the morning and play golf all day, it makes sense to determine what it entails to join a club (some require substantial up-front fees) and whether the area you live in—or want to live in—has adequate courses.

Similarly, if your dream is to travel the world, you are going to want to live in close proximity to an airport (or seaport if you prefer to cruise). You’ll also want to make sure that there are no other obstacles that will affect your plans. By deciding what your dream life after retirement would look like, you can shape the rest of your plans to make it work.

You can’t plan retirement without knowing what you want to do in it.

2. Do I Have the Cash?

It’s great to have goals, dreams, and ambitions, but, frankly, they don’t mean a thing if you lack the financial means to fulfill them. Rather than living on hope, it’s best to do some soul-searching to determine what your future expenses will be and whether you will have enough money to live comfortably and actually enjoy your retirement years.

Financial planners have been arguing for decades over how much money the average person or couple needs upon retirement. Some say that in order to maintain your lifestyle, you’ll need 60% to 80% of your pre-retirement income annually. However, many of those estimates are just that—estimates.

The point is that if your goal is to travel the world upon retirement, do some research. Figure out how much it will cost, and then make sure that you’ll have enough money to live your dreams (and pay your bills) for the rest of your life. It’s possible that you may need to change your dreams or cut back on your expenses in other areas to make it work.

3. Should I Move?

When people are young and employed they tend to live in more urban areas. However, it is often prohibitively expensive for seniors to live in, or on the outskirts of, major cities. Therefore, people who are expecting to retire within the next few years should consider making a move to a more affordable location. There are many choices out there, but how do you evaluate all of the possibilities?

There are a number of factors that should be considered when picking a new place to live. For example:

  • Proximity to family members
  • The cost of housing (and owning versus renting)
  • Access to healthcare facilities
  • Access to entertainment (such as shows and sporting events)
  • Proximity to a major airport
  • Year-round weather conditions
  • Taxes (state income, property, and estate taxes)

It is almost impossible to find a location that fits every need, so the best strategy is to settle on an area that meets the bulk of your needs, particularly those related to long-term health and well-being. For example, although cold weather might not bother you now, when you are 85 it could have a debilitating effect on your body or your ability to keep active for some part of the year.

If you think this will be the case for you, perhaps you might want to consider joining the flock and moving to a warmer climate, even if it doesn’t address some of the other factors mentioned above.

4. Should I Sell My Home?

Most retirement planners focus on an individual’s investment portfolio. The portfolio is important, but it’s often not the average person’s most valuable asset or largest potential source of liquidity. The bulk of many people's wealth is tied up in their homes. As people approach retirement age, they should consider selling their residences, particularly if the mortgage has been satisfied and the property has increased significantly in value.

Why sell? First of all, you’ll generally need less space, and a smaller home is easier to maintain. However, that’s not the primary reason. The main reason to sell is to gain liquidity and make sure that you have enough cash to live on and establish an emergency fund. After all, what good does sitting on a $1 million home do if you don’t have the money to buy adequate health insurance or do the things you enjoy?

Ideally, people approaching retirement should try to “game” the real estate market. That is, they should try to figure out if it makes sense to sell the family home now and rent a home for a couple of years until retiring, or if it makes better sense to hold onto the home until the date they actually bid the workplace adieu. The decision can be crucial. Just think about what happened to those who waited to sell their homes until after the housing bubble burst in 2008.

So what is the best way to go about gaming the market? Very simply, pay close attention to trends in your region by reading the local newspapers, perusing neighborhoods for open houses, and inquiring with a local real estate agent as to whether home prices are rising or declining.

Here’s an example. Suppose that you are 10 years from retirement and the real estate market is currently running hot.

  • You secure an extra $100,000 from the sale of your home, thanks to favorable market timing.
  • You then invest that money in a vehicle that yields an 8% return per year.
  • Over a 10-year period, it will grow into more than $215,000. That is a lot of money!
  • Before you get too excited, remember you’ll also need to subtract the cost of renting an apartment for those 10 years.
  • Let’s say your new rent is $1,000 per month (not cheap but certainly nothing extravagant). Over a 10-year span, this will add up to $120,000.
  • Now do the math: $215,000 - $120,000 = $95,000. That’s still a considerable net gain from selling into a hot market.

5. Have I Made an Estate Plan?

In order to ensure that your assets are properly transferred to your heirs—and in order to minimize estate taxes—it makes sense to do some estate planning. As unpleasant (and dull) as the thought might be, it’s important to sit down with your attorney and accountant to determine the most cost-effective way for your estate to get delivered to beneficiaries upon your death.

For starters, you need a will. But that might be just the beginning. The best approach might also entail setting up a trust and/or custodial accounts for children or grandchildren.

It is important to consider estate planning now because there is a three-year “look back” with regard to assets previously removed from your estate. In other words, if you have a trust buy a life insurance policy on your life and then you die within a three-year period after the contract was signed, the amount of the insurance could be included in your estate for estate tax purposes. Advanced planning is the key to estate planning and, if you think about it, your overall happiness in retirement.

6. Do I Have a Personal Plan—And Needed Documents?

Take some time to plan for your own care—and that of your spouse, if you're married—as you get closer to the risks of advanced age. Set up healthcare proxies, powers of attorney, and other documents well before you need them when you can thoughtfully consider your needs and preferences.

Don't leave these crucial decisions until there is an emergency when your energy and abilities may be compromised. Others could end up making choices that would not have been your preferences. Get there first and arrange your own life.

The Bottom Line

If you are in the home stretch, don’t hold back now. Retirement planning can be overwhelming at first, but if you can answer these six questions, you’ll be well on your way to generating a solid retirement plan, and you’ll be happy you did.

Approaching Retirement? Can You Answer These 6 Questions? (2024)


What are the 6 stages of retirement? ›

Let's take a closer look at each of the six phases of retirement.
  • Pre-Retirement: Planning Time. ...
  • The Big Day: Smiles, Handshakes, and Farewells. ...
  • Honeymoon Phase: I'm Free! ...
  • Disenchantment: So This Is It? ...
  • Reorientation: Building a New Identity. ...
  • Routine: Moving On.

What are 6 of the most common types of retirement plans? ›

To help you navigate your options, here's a comparison of six of the most common types of retirement plans:
  • 401(k)
  • Traditional IRA.
  • Roth IRA.
  • SEP IRA.
  • Simple IRA and Simple 401(k)
  • Solo 401(k)
Mar 18, 2020

What questions to ask before you retire? ›

12 Retirement Questions to Ask
  • How Much Money Do I Need to Retire?
  • When Should I Claim Social Security?
  • How Much Will Healthcare Cost in Retirement?
  • How Do I Spend From My Retirement Savings?
  • How Should I Invest My Retirement Savings?
  • When Do Most People Retire?

What are the three biggest mistakes when it comes to retirement planning? ›

Five retirement mistakes to avoid
  • Retirement Mistake #1: Failing to take full advantage of retirement saving plans. ...
  • Retirement Mistake #2: Getting out of the market after a downturn. ...
  • Retirement Mistake #3: Buying too much of your company's stock. ...
  • Retirement Mistake #4: Borrowing from your QRP.

What is the 4 rule retirement? ›

The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4 percent of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years.

What is the 5 retirement rule? ›

50 - Consider allocating no more than 50 percent of take-home pay to essential expenses. 15 - Try to save 15 percent of pretax income (including employer contributions) for retirement. 5 - Save for the unexpected by keeping 5 percent of take-home pay in short-term savings for unplanned expenses.

What is a good pension amount? ›

The 50 – 70 rule is a quick estimate of how much you could spend during your retirement. It suggests that you should aim for an annual income that is between 50% and 70% of your working income.

How much money does a person need to retire comfortably in the United States? ›

Here's how much you would need to save in to comfortably retire: Current retirement savings balance: $10,000. Desired annual income (after taxes) during each year of retirement: $50,000. Annual Social Security benefit: $21,379.56 (given that the average social security benefit is $1,781.63)

What is the average pension payout per month? ›

Average Monthly Retirement Income

According to data from the BLS, average incomes in 2021 after taxes were as follows for older households: 65-74 years: $59,872 per year or $4,989 per month.

What are the signs that you are ready to retire? ›

  • You've Hit Full Retirement Age.
  • You're Debt-Free.
  • You're No Longer Supporting Kids or Parents.
  • You Have a Retirement Budget.
  • Your Portfolio Is Updated.
  • Your Spouse Agrees.
  • The Bottom Line.

What should I say when I retire? ›

What are the best examples of retirement wishes?
  • Your retirement just began. ...
  • It is not easy to say goodbye, But, I will hold on to the sweet memories of working with you. ...
  • Retirement is a time of self-reflection. ...
  • You have completed a successful career. ...
  • You are one of the best colleagues I have worked with.
Nov 30, 2022

What is the best first step to prepare for retirement? ›

Saving Matters!
  • Start saving, keep saving, and stick to.
  • Know your retirement needs. ...
  • Contribute to your employer's retirement.
  • Learn about your employer's pension plan. ...
  • Consider basic investment principles. ...
  • Don't touch your retirement savings. ...
  • Ask your employer to start a plan. ...
  • Put money into an Individual Retirement.

What is the number 1 retirement mistake? ›

1. Having No Retirement Plan. Not starting the retirement-planning process is one of the biggest retirement mistakes you can make. You should determine what you want your future to look like, as well as how much money you can realistically set aside.

What is the number one mistake retirees make? ›

Among the biggest mistakes retirees make is not adjusting their expenses to their new budget in retirement. Those who have worked for many years need to realize that dining out, clothing and entertainment expenses should be reduced because they are no longer earning the same amount of money as they were while working.

What is the biggest worry in retirement? ›

The most frequently cited retirement fear is “outliving my savings.” Fifty two percent of all workers (young and old) say that they fear outliving their savings and investments, and 42% are concerned that they will not be able to meet the basic financial needs of their household.

What is the $1000 a month rule for retirement? ›

The (Overly) Simple Math Behind the “$1000/Month Rule”

The math behind the $1000-a-month rule is simple. If you take 5% of a $240,000 retirement nest egg each year, that works out to $12,000/year, which, divided into 12 months, gives you $1000 each month. Painless, right?

What is the 90 10 rule of retirement? ›

A typical 90/10 principle is applied when an investor leverages short-term treasury bills to build a fixed income component portfolio using 10% of their earnings. The investor then channels the remaining 90% into higher risk but relatively affordable index funds.

What is the retirement 95% rule? ›

The 4% rule for retirement is a guideline that suggests withdrawing 4% of your savings each year in order to have a 95% chance of not running out of money. This amount is adjusted for inflation, so you can live comfortably in retirement without fear of outliving your money.

What are the 3 R's of retirement? ›

Therefore, as you consider ways you can support your clients as they prepare for retirement, determine to be proactive in nurturing their resiliency, resourcefulness, and renaissance spirit—three qualities that will help them to make the very most of every age and stage of life.

What is the 70% rule for retirement? ›

The 70-80% Spending Rule

Retirement advisors at Fifth Third Securities generally agree that a good rule of thumb for estimating your future spending is to multiply your current monthly spending by 70-80%.

What is the 80 20 retirement rule? ›

An 80/20 retirement plan is a type of retirement plan where you split your retirement savings/ investment in a ratio of 80 to 20 percent, with 80% accounting for low-risk investments and 20% accounting for high-growth stocks.

Can I retire at 65 with 300k? ›

In most cases, you will have to wait until age 66 and four months to collect enough Social Security for a stable retirement. If you want to retire early, you will have to find a way to replace your income during that six-year period. In most cases $300,000 is simply not enough money on which to retire early.

Can I retire at 60 with 500k? ›

The quick answer is “yes”! With some planning, you can retire at 60 with $500k. Remember, however, that your lifestyle will significantly affect how long your savings will last.

How much do I need to retire if my house is paid off? ›

One rule of thumb is that you'll need 70% of your pre-retirement yearly salary to live comfortably. That might be enough if you've paid off your mortgage and are in excellent health when you kiss the office good-bye.

What is the average 401k balance for a 65 year old? ›

Average and median 401(k) balance by age
AgeAverage Account BalanceMedian Account Balance
2 more rows
Jan 20, 2023

What does the average American retire with? ›

However, according to the Federal Reserve's “Report on the Economic Well-Being of U.S. Households in 2019,” 60% of Americans either do not realize if they're on track or are unsure if they're on track. The Federal Reserve's most recent data reveals that the average American has $65,000 in retirement savings.

What is the average Social Security check? ›

Average Social Security retirement benefits in 2023

Average payments for all retirees enrolled in the Social Security program increased to approximately $1,827, according to the Social Security Administration (SSA).

Can you collect a pension and Social Security at the same time? ›

Yes. There is nothing that precludes you from getting both a pension and Social Security benefits. But there are some types of pensions that can reduce Social Security payments. Join our fight to protect Social Security.

How do I get the $16728 Social Security bonus? ›

To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.

What is a respectable age to retire? ›

Among those looking ahead to retirement, many expect to step away from work at age 65, according to the 2023 Retirement Confidence Survey. Although 65 is the anticipated median retirement age, workers report retiring at a median age of 62, the survey found.

What are the best years to retire? ›

67-70 – During this age range, your Social Security benefit, if you haven't already taken it, will increase by 8% for each year you delay taking it until you turn 70.

What is a good age to retire? ›

The normal retirement age is typically 65 or 66 for most people; this is when you can begin drawing your full Social Security retirement benefit. It could make sense to retire earlier or later, however, depending on your financial situation, needs and goals.

How do you say goodbye before retirement? ›

“It's been an honor and a privilege to work with you for the last 23 years. I think of you not only as a boss but a friend as well.” “When you love what you do, work doesn't feel like work. Thank you for making me happy to show up in this office every day for the last two decades.”

How do I gracefully retire? ›

8 Tips to Gracefully Ease into Retirement
  1. Do your financial homework. ...
  2. Consider getting a part-time job, working from home, or starting your own small business. ...
  3. Volunteer. ...
  4. Take classes. ...
  5. Stay Healthy. ...
  6. Don't be antisocial. ...
  7. Be prepared for a possible shock to your identity, but don't let it get you down.

How do I gracefully retire from my job? ›

Follow these steps to resign gracefully and leave your job in a positive manner:
  1. Notify your supervisor. Tell your supervisor you intend to leave your job before notifying your coworkers and clients. ...
  2. Submit your resignation letter. ...
  3. Work through your notice period. ...
  4. Return any company property. ...
  5. Take personal items home.
Feb 3, 2023

What is the 1 3 rule retirement? ›

If you find yourself in this situation, consider the “Rule of Three:” When you have an unexpected windfall, put 1/3 of the windfall towards paying down debt, 1/3 towards long-term saving and investing, and the remaining 1/3 towards something rewarding or fun. Let's take each in turn and talk about the benefits.

Is it better to retire at the beginning or end of the month? ›

Is it better to retire at the beginning or end of the month? Retiring on the last day of the month is typically the best option. This enables you to collect all your paychecks during this period. You can also benefit from collecting any holiday pay that might be offered by your employer for that month.

Why the last 5 years before you retire are critical? ›

The last five years before you retire may be a critical point of time—at least when it comes to retirement planning. That's because you must determine whether you truly can afford to quit work within that period of time.

What are 5 common mistakes people do when they retire? ›

Take inventory of your assets and your strategy, or you could regret it later
  • Expecting to work past retirement age. ...
  • Taking too much risk — or too little. ...
  • Ignoring the 50-plus catch-up provisions. ...
  • Carrying credit card debt. ...
  • Taking on college debt. ...
  • Overlooking health maintenance. ...
  • Leaving out insurance.
Mar 14, 2023

What are the worst retirement mistakes to avoid? ›

The Bottom Line

The worst retirement mistakes are probably not planning to retire at all, failing to take full advantage of retirement savings plans, mismanaging Social Security, making poor investment decisions and neglecting the non-financial side of retirement.

What not to do when you retire? ›

10 Things You Should Not Do When Retiring
  1. Ignoring the implication of the process. ...
  2. Not having an updated financial plan. ...
  3. Tapping into your 401(k) or other retirement accounts early. ...
  4. Accruing debt. ...
  5. Making risky investments without diversifying. ...
  6. Don't neglect your estate planning. ...
  7. Don't live a sedentary life.
Dec 27, 2022

What makes the happiest retirees? ›

The happiest retirees know very well how to travel, play and explore, and they wholeheartedly engage in three or more hobbies on a regular basis, says Moss. “Curiosity may have killed the cat, but a lack of curiosity kills the happy retiree,” he says. Keep in mind, it doesn't really matter what your interests are.

What are some money moves retirees almost never regret? ›

Diversifying Investment Vehicles

Most retirees never regret planning ahead for retirement to meet their goals and investing early to reap the benefits of compound interest. Another money move retirees seldom regret is diversifying their savings and investment vehicles.

What is the 25 rule for retirement? ›

The first is the rule of 25: You should have 25 times your planned annual spending saved before you retire. That means that if you plan to spend $30,000 during your first year in retirement, you should have $750,000 invested when you walk away from your desk.

Why most people can't retire? ›

Working benefits your finances.

The most obvious problem with retirement is that you must keep spending money even though you're no longer earning it. You still have to cover living expenses, such as housing, healthcare, and food costs, which for over half of households in retirement, is impossible.

What is retirement anxiety? ›

Retirement anxiety is an emotion of concern or worry, experienced by people yet to retire, about the prospect of retirement. Examples include concerns about how they'll fill their time, financial worries and feeling a loss of identity.

What is the golden rule for retirement? ›

In the first year of retirement, you can withdraw up to 4% of your portfolio's value. If you have $1 million saved for retirement, for example, you could spend $40,000 in the first year of retirement following the 4% rule. Beginning in year two of retirement, you adjust this amount by the rate of inflation.

What is the 3% rule in retirement? ›

As a result, retirement experts have downgraded the Four Percent Rule to the Three Percent Rule. In short, to enjoy a reasonably high expectation of not running out of money prior to death, you should never withdraw more than three percent of your initial portfolio value in retirement.

What is rule 100 in retirement? ›

According to this principle, individuals should hold a percentage of stocks equal to 100 minus their age. So, for a typical 60-year-old, 40% of the portfolio should be equities. The rest would comprise high-grade bonds, government debt, and other relatively safe assets.

What is a good monthly retirement income? ›

According to data from the BLS, average incomes in 2021 after taxes were as follows for older households: 65-74 years: $59,872 per year or $4,989 per month. 75 and older: $43,217 per year or $3,601 per month.

Which is the biggest expense for most retirees? ›

Housing. Housing expenses—which include mortgage, rent, property tax, insurance, maintenance and repair costs—remained the largest expense for retirees.

What is the 7% withdrawal rule? ›

What is the 7 percent rule? The 7 percent rule is a retirement planning guideline that suggests you can comfortably withdraw 7 percent of your retirement savings annually without running out of money.

Can I retire at 55 with $2 million? ›

If you have multiple income streams, a detailed spending plan and keep extra expenses to a minimum, you can retire at 55 on $2 million. However, because each retiree's circ*mstances are unique, it's essential to define your income and expenses, then run the numbers to ensure retiring at 55 is realistic.

Can I retire at 55 with $1 million? ›

It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.

How much should I have in my 401k at 55? ›

By age 50, you should have six times your salary in an account. By age 60, you should have eight times your salary working for you. By age 67, your total savings total goal is 10 times the amount of your current annual salary. So, for example, if you're earning $75,000 per year, you should have $750,000 saved.

What are the 3 important components of every retirement plan? ›

For something as important as your financial future, it's important to work with a financial professional. Everything in the plan should be coordinated — taxes, Social Security, income planning and investments.


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