Career Versus Retirement Lifestyles
As you work toward your peak career years, your job offers structure to your life. An important part of retirement planning is deciding what you want your days to look like once that structure changes. Creating an achievable goal is about building a nest egg to support you, but also about planning hobbies and building interests around what you would like to do after you retire.
Does Your Current Career Support Your Retirement Goal?
Too many people don't spend enough time thinking about what they would like their retirement lifestyle to look like. Start developing your retirement goal by making a list of your priorities.
Answer questions such as:
What sort of activities and interests do you want to spend your days involved in?
What region and kind of home do you want to live in?
What additional hobbies or activities would you like to cultivate that you don't have time for now?
What transitions or changes do you foresee during your retirement years? After all, your retirement could last twenty to thirty years or more. How do you see your life changing over that time?
Write your answers down and read through them periodically. Allow your ideas to change over time.
Plan to leave yourself options when you retire from your current job. Be sure the skills you'll have will keep you busy with part-time work, volunteering, or hobbies. Plan for a tax-efficient nest egg that includes investments in retirement accounts such as IRAs and 401(k)s, as well as investments outside of these plans. Spend money on your health now to improve your quality of life and reduce the cost of health care later.
Thinking of life after work really stresses me out. I'm sure I'm behind in my savings. How can I catch up?
First, don't stress. You start getting on track the minute you start thinking and planning. Set up your accounts. Let yourself dream. Define your goals and you'll be surprised how quickly you feel more in control.
Planning to Work into Your 70s
Many people plan to work into their 70s at their current job or at a different one. This may be a lifestyle choice for some, and for others it's a way to avoid the pain of saving now for retirement. After all, if you earn money into your 70s your nest egg can be smaller because it won't have to support you as long.
Be realistic about your health and the industry you're working in if you're planning to work into your 70s. Realize that you may want to work, but your health or age discrimination in your industry might prevent you. Whether or not you're planning to work into your 70s, it's better to plan your savings so that you don't absolutely need to work much past age 65 or 67.
Retirement accounts are accounts with tax law restrictions on making withdrawals before age 59½. Examples are IRAs, 401(k)s, and 403(b)s. Nonretirement accounts don't have these tax law restrictions; money can be withdrawn from them at any time. Examples of these are your individual, joint, and trust accounts.
Tapping Home Equity
For many people, their home is their biggest asset. This can present problems in retirement because home equity can only be tapped by borrowing against that equity — and incurring additional interest expenses — or by selling the house. Planning to sell is fine if you've set that goal and psychologically have come to grips with it, but don't paint yourself into a corner by building home equity at the exclusion of all else.
Set up your plan so that you're paying down the mortgage as well as building investments in retirement accounts and nonretirement accounts.
