Most of us think of retirement as that thing on the horizon that’s not bound to happen anytime soon. You will be surprised to know that even those who are in their 50s are not yet ready for retirement—more so, people who are in their early 30s or 40s. But retirement happens not only by choice but by circumstances. You may be forced to retire because of disability, illness, or employer downsizing.
What happens when you suddenly need to retire and you’re not done paying your multifamily construction loan yet? That means that the repayments have to come from your retirement benefits. What happens when you get sick? Will the government cover all your medical expenses? Do you have savings just in case you get sick? Do you have money for medical insurance?
These are great and important questions everyone needs to ask themselves. You are going to retire whether you want to or not. You cannot work until you’re in your 90s. At some point, you will have to stop working and rest.
How Long Will I Be Retired?
How much you need will depend on when you will retire and how long you will be retired. The longer your retirement, the higher your savings and retirement benefits should be. Many people underestimate the years they will live. Men will most likely live until they’re 87 years old, while women are likely to last longer than 90 years old.
If longevity runs in your family, add five years onto the lifespan of your oldest relative. That will determine your average life expectancy. You have to prepare for that number. If you are to retire at 65 years old and expect to live well into your 90s, you have to prepare for 30 years’ worth of expenses.
How Much Will I Need?
If you plan to retire early, you will spend most of your money in the early years of your retirement. You might want to travel or get into an expensive hobby. You may do crafts, gardening, and many other things. But this isn’t an important period of your retirement. What comes after your younger retirement years is more expensive. Medical expenses and long-term care needs will dry up your savings and retirement benefits.
What Income Will I Expect to Have While Retired?
Being retired doesn’t mean that you cannot earn. You can have more than one source of income when you are retired. Some secure income sources are your state pension, income from a past employer’s pension scheme, and other sources of income such as stock dividends, etc. You can, of course, earn extra from freelancing as a consultant or any other position related to your previous work. You can also do crafts and sell these online. There are plenty of opportunities that can bring you profit.
There is no exact formula for retiring comfortably. You should plan and ready for the next chapter of your life. You should prepare for the worse, too. There are plenty of “just-in-cases” that will demand higher expenses. Planning a wiggle room in your expenses will make you more confident that you’re ready for retirement.