How will you know whether or not your money will last once you stop earning a monthly salary? Is there an age when retiring suddenly makes sense or do you just go with your gut instinct?
There is no real science behind knowing when to retire but there are certain things to consider. Retirement is not only about giving up your job and relaxing - it's about entering a new, exciting but somewhat challenging stage of your life. The opportunities that come with retirement are endless however, a successful retirement doesn’t come without it hurdles. There are many things to think about such as living on a smaller income, creating a health and wellness strategy, allocating personal time, establishing living arrangements and adopting different social roles.
One place to start is by assessing whether or not you’re financially capable of leaving your workforce. A major question to ask yourself would be: Do I have enough money saved to maintain an acceptable standard of living throughout my retirement that could potentially last more than 30 years? It’s difficult to answer this question with complete certainty because of of factors you can’t control such as how long you might live, the rate of return on your investments and what your expenses will be during post-career life. But, you can get a rough idea from taking a close look at your finances.
In life, we all wish for good health but, unfortunately, unexpected health issues can play a part in determining when we retire. We all see retirement as the time in life when we get older, even if we remain healthy, we won’t remain young. Retiring as soon as you can afford to for health reasons is something to be considered. If you need to reduce your cost of living, then by all mean, do so. After all you want to make sure you’re living a healthy and active retirement as best you can.
This quickly brings us to our next point, having enough money saved for your funeral. Funerals don’t come cheap. However, a good funeral doesn’t have to be expensive and there are several ways you can save on expenses, such as a direct cremation - No fuss, and your family can arrange the service in their own time. After David Bowie's request for his body to be taken straight from the hospital to the mortuary to be cremated these have become an increasingly popular choice. You can compare direct cremation prices for an affordable funeral followed by a more personal memorial event.
Successful retirees emphasise how important planning for happiness and productivity is, which includes constructing their actions to satisfy their needs and wants. You need to create a vision of a realistic retirement plan before retirement, not after, in order to achieve a well balanced lifestyle that includes entertainment, travel and social activities.
Start by putting together a retirement budget so you'll have a realistic idea of the amount of income you have to cover your expenses when your salary stops. You can do your budget the old fashioned way with paper and pencil but we find online tools such as BlackRock’s Retirement Expenses Worksheet would be a lot easier, listing all of the different expenses including both living costs and personal expenses. After going through this sort of analysis you’ll be able to see whether or not you need to postpone retirement until you improve your income status.
Ultimately deciding when to retire is really about deciding how you want to spend the time you have left in life. While we recommend you weigh up the issues we’ve spoken about above, it’s up to you to decide when the time is right.