Many people are living longer, which means your retirement could last for decades. But that doesn’t mean you should start planning later. Developing a thoughtful plan can help you have a positive experience in retirement.
Here are seven questions to ask yourself before you retire:
— When do you want to retire?
— Have you saved enough to retire?
— How will you maintain your standard of living?
— Are your investments appropriate for a long life in retirement?
— Are your affairs in order?
— Do you want to leave a legacy?
— How will you spend the extra time in retirement?
When Do You Want to Retire?
You might get to decide when to leave the workforce, or you could be forced into retirement ahead of schedule
. “If you have an unforeseen circumstance, would you be able to retire sooner than that goal date? Because a lot of times things happen, health issues arise and your circumstances change,” says Jennifer Belmont Jennings, a senior wealth advisor at Hightower Wealth Advisors in St. Louis, Missouri. “You might not make it to your goal retirement date before you need to actually retire.”
[See: The Best Places to Retire in 2022.]
Have You Saved Enough to Retire?
Consider how much retirement income you will receive from Social Security, investments and passive income. Look at your savings and sit down with a financial planner to determine a sustainable draw down rate and how long your money will last. If the numbers don’t work out, you may need to continue working, get a job in retirement or plan for a lower standard of living in retirement. Remember to factor in inflation. “The cost of living is going to increase while you have no income,” says J.R. Gondeck, managing director and partner with the Lerner Group in Deerfield, Illinois.
How Will You Maintain Your Standard of Living?
Many people assume that their expenses will decrease in retirement, and there could be some costs you can eliminate. However, many of your expenses will stay the same and some may even increase. You might want to spend more in retirement, perhaps to travel and do things you couldn’t do when you were working. “Everybody’s assumption is you spend less in retirement,” Gondeck says. “The reality is you spend 20% to 25% more, because you have more time to spend.”
[READ: 25 Things to Do When You Retire.]
Are Your Investments Appropriate for a Long Life in Retirement?
Think about how long you won’t be working after retirement. Many people live into their 80s and 90s. You could live longer in retirement than you did in your working life. “This is going to help speak to how much you need to put away and how it should be invested,” Jennings says. “A lot of your money needs to be invested for the long term, especially if you live 30 to 40 years after your retirement.”
Are Your Affairs in Order?
Make sure you have important financial documents in place including a will or trust, living will and a medical or health care power of attorney. Dying without a will can burden your loved ones, who, while suffering through grief, may also have to figure out how to pay bills, find financial and legal documents and hire an estate attorney.
Do You Want to Leave a Legacy?
Some retirees want to spend and enjoy the money they have accumulated, while others intend to leave funds to children and grandchildren or a charity. “Some people are going to spend every penny, and for some people it’s really important to make sure that they’re passing something on to the next generation,” Gondeck says. “That’s going to change how you put money away and the way that you put money away.”
[SEE: 12 Ways Retirees Spend Their Newfound Free Time.]
How Will You Spend the Extra Time?
In addition to your financial plan, you should determine how you would like to spend your days in retirement. “You used to have eight to 10 hours per day with your job in your 30- or 40-year career. Now you have that extra time,” Gondeck says. “Put some really deep thought into how you will spend your time in retirement.”
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Questions to Ask Yourself During Retirement Planning originally appeared on usnews.com
