“The most common need of those preparing to step into retirement isn't what you think: it's confirmation that all the hard work, discipline and saving was enough.”
People getting ready to retire really want to be reassured that they did a good job and were good stewards of their money, according to Investopedia’s article “Determining If You’re Prepared for Retirement.” They also want confirmation that the retirement assets they’ve built over a lifetime will last for the rest of their lives and that they’ll be able to live in comfort.
Commonly asked questions are:
- Am I saving enough, or did I save enough?
- Can I retire, or did I make a mistake and retire too early?
- Were my investment decisions the right ones?
- How am I doing, compared to my peers?
The answers to these questions are important, but like so many things in life, there is no “one-size-fits-all” answer. Just because you’ve accumulated six, seven or even eight figure retirement savings, doesn’t mean you’ve “won” the retirement game. In this case, size doesn’t always matter.
One of the key factors to a successful retirement is your income to expense ratio. Can you generate enough income from all sources, without drawing down too much from your portfolio?
If you have a small to non-existent portfolio, but you have a good-sized pension, maybe you don’t need such a big portfolio. If you live very simply, it’s possible that Social Security benefits and modest withdrawals from your investments might take care of your needs.
Remember that just because you have a large portfolio, does not mean you don’t risk running out of money during retirement. If you spend lavishly on first-class vacations, drive luxury cars and live in a house that costs a fortune to run, you can easily get yourself into a tight spot.
Take a long hard look at all sources of income to determine how long your portfolio will last. You should include Social Security, pensions, retirement accounts and any other sources of income. It is important to figure out how much income you’ll need on annual and monthly basis. You’ll then have a better sense of whether you are prepared for retirement.
Don’t forget to prepare an estate plan, unless you have already done so. A will, power of attorney, healthcare directive and other documents will help protect you and your loved ones. You need an estate plan, regardless of the size of your portfolio. A qualified estate planning attorney can help you prepare this part of your retirement.
Resource: Investopedia (July 19, 2018) “Determining If You’re Prepared for Retirement”
Suggested Key Terms: Retirement, Pension, Social Security, Estate Plan
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