Retirement in Three Steps

As more people are retiring later in life than ever before, it may be difficult to determine what the right age to retire truly is, and how to know if you are ready financially. Fortunately, it only takes three questions to confirm you are able to retire securely and safely – allowing many seniors to enjoy years of relaxation and quality life, whether that means living independently or having to look into an assisted care facility.

The first question one should ask, is how long do you expect to live? As macabre as this sounds, it is a reality we all face. Obviously we cannot know exactly when we will die, but we can bring some planning into the mix with an immediate annuity. These work by giving a sum of money to your insurance company in exchange for a monthly stipend guaranteed to arrive for the rest of your life, however long that may be.

Immediate annuities are great because they allow you the security of income for however long you need it, but can also be a risk if you hand over more money than you end up needing. If you outlive your money, then it is very helpful because you are guaranteed to continue receiving an income. However, if you pay $300,000 to the insurance company and pass on the next year, that is money your family has lost.

The second question you can ask is, do you really need to work? Many work past 65 because they need to for financial reasons. Other feel it is a necessity for emotional reasons – they enjoy the social aspects of the work place and keeping their days filled with community and things to do.

However, even if your health is fine and your days ahead look bright, you don’t necessarily need to work if you don’t have to. Discuss with your family as to when retirement should be, and if you realistically can afford to retire and have reached the ceiling in terms of job promotions and raises, then it may in fact be time to move on to a more relaxed lifestyle.

A final question to ask is, can your income keep up with the changing tides of the economy? You may be able to live like a king in today’s deflated market, but what about 10 years from now? How much income will you need to be comfortable and will your investments fail or benefit you in the end? If you have saved 10 percent of your income for years, then you should be set. Even better, now says financial advisers, is a savings of 15%. If you have managed to do this, and you are beginning to grow weary of the working world, this third and final question may make the decision for you. However, if you are struggling to make ends meet, there are many positives to staying in the work force for just a bit longer.

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