Your retirement age has a way of creeping up on you when you least expect it. And then you've got to ask yourself, 'How can I retire?' Perhaps you've got less than 5 or 10 years and haven't been able to give it much thought - or much savings! What should you do?
In this article, I'll show you how to plan to retire enjoyably if you've only 5 years or so left to prepare.
Retirement shouldn't be just about surviving. It should be about surviving enjoyably. It's your last phase of life and you ought to look forward to getting up every day with a smile on your face. So be sure that's part of your plan.
The raw basics of retiring rests on have your retirement income exceed your necessary retirement living expenses. So the first step is to project what retirement income you'll have based on your current status. I'll say you're willing to work 5 years more just to have a number to work with.
Project your retirement income:
Three possible source of retirement income are your Social Security benefits (income), your pension, and the income you can extract from your savings. You should plan on taking just 4% of your savings for the income since it can generate that without depleting itself. So check with Social Security and your company to get a projected income from each in 5 years based on maintaining your present income. Add to these 4% of your current savings. That'll give you your retirement income based on your current status.
Analyze your current minimum living expense:
If you were to stay in the same situation you're in now - except for going to your current job- ask yourself what would be your living expenses? Break it into various categories of expense too. Don't include your mortgage if it'll be paid off within 5 years or any work-related expenses.
Some planners just assign a living expense figure that's about 75% of your current income. But I suggest you calculate your necessary living expenses and then add your enjoyment living expenses to that - so you're truly aware of the nature of your expenses.
Find your Net Projected Retirement Income - and think about it!
Subtracting the projected living expenses from your projected retirement income shows you where you're at now. If you've got plenty of excess income, you're OK.
But if you're running a deficit - in the red, you've go to develop a serious plan to create an enjoyable retirement life and, then put it into action. If, so...
Plan to increase your retirement income:
If it's more income you need, then you've go to workout how much more you can save over the next 5 years. Perhaps you can forego some unnecessary expenses to put into savings. Or, you can pick up a part time job to save more.
But find a realistic savings plan you can live with for 5 years. Add the total contributions with some reasonable earnings to get a 'final' savings amount. Take 4% of that to see if it puts you comfortably in 'the black' during retirement.
You might also consider working part time during the first part of your retirement to help out your income. But make it an enjoyable part time job.
Plan to lower your retirement living expenses - by moving:
You can also get comfortably into 'the black' by lowering your retirement living expenses. This is perhaps the more creative part of retirement planning. It involves moving. So let's see some options.
If you like you're area, you can buy-down to a nearby home or condo. This can free up some of your home equity for more savings - which in turn increases your retirement income. Your other expenses will most likely remain unchanged.
Or, you can move to some other U.S. location where you not only get a buy-down benefit but other living expenses will be reduced. You'll still have the 'U.S.' environment- and hopefully find an area that suits your retirement activities.
Lastly, you can move off-shore. Doing so can produce substantially lower living expenses. Places like Panama, Mexico, or Ecuador are considerably less expensive but can still supply you with a similar standard of living to the U.S. Doing so can make even a meager income keep you in the black.
Moving off-shore will require you to do more thinking about what can make you happy and how far can you live from your love ones - your children and other friends. Find out what's important for you to make your retirement life worth living. You may have to break old habits, but you may end up happier and more satisfied.