Are You Retirement-Ready?
Earning enough money to live a good life today – while also saving and investing enough money to live a good life throughout the 20-30 years of retirement – is one of our biggest challenges as adults. While putting enough aside can seem impossible, having a plan can help you reach your retirement goals. And regardless of where you are in relation to retirement, BCU can help you get started on your plan. To assess your retirement horizon, ask yourself these 5 questions:
1) Where are you now?
Review your current financial situation and assess what you currently earn and currently spend, along with what you own and what you owe. Being honest about where you are now will help you to get an idea of both the opportunities and obstacles in your journey ahead. Getting started is easy with our easy-to-use budgeting tool, OnTrack.
2) What will your retirement look like and when do you want to retire?
When it comes to your retirement, do you plan on working part-time? Do you see yourself traveling? Are you planning for only yourself or are there other people for whom you are responsible? Maybe you have aging parents, you plan to cover your kids’ college expenses, or you want to leave a bequest to a friend or charity. Getting a clear vision of your ideal retirement lifestyle now can help you design an effective plan to get there.
3) How much will your retirement cost?
AARP has reported that nearly half of Americans age 65 and older can't afford to meet all their daily needs. So it’s important that you have a clear picture of what your retirement will cost.
Start by analyzing your fixed expenses including food, housing, healthcare and transportation. Then look at variable expenses, which are any expenses that can be decreased if necessary, like eating out, entertainment and travel. Getting started in analyzing these expenses with Pilot™, the Credit Union’s money management software, is free and easy.
A common mistake when planning for your retirement is to underestimate the impact of inflation. Even a conservative inflation rate can have a significant impact on your purchasing power.
4) How will you fund your retirement?
If you are like most people, at some point you will transition from work-produced income to income from your savings and investments. Evaluate your predictable sources of income like Social Security, pensions and income annuities. Will these income sources be enough to meet your needs? If not, you may need to supplement your predictable income with conservative withdrawals from your investment portfolio, continue to work (full-time or part-time) or decrease your retirement expenses
5) Do you have gaps between where you are now and your ability to fund your retirement lifestyle?
Now that you’ve planned your journey, look back and consider your gaps and potential pitfalls that you might encounter along the way. The key question to answer is: Can your income cover your expenses over a 20- to 30-year retirement horizon when also factoring in inflation?
After you’ve calculated your retirement income and expenses, assessed your gaps, and put plans in place to close those gaps, that still might be a tough question for you to answer but you don’t have to do it alone.
At BCU Wealth Advisors, our mission – and our passion – is helping families design and implement financial plans that navigate life’s journey. If you have questions about your financial outlook or want more information on how to plan for your retirement, visit our website at bcu.org and look for Life. Money. You.™ Or contact us at BCU Wealth Advisors directly or contact us at 800.388.7000 ext. 8700.
Life. Money. You.™ and Pilot™ are trademarks of BCU.