It’s important to understand your goals before you retire. Not only will doing so help you live a more fulfilled retirement, it’ll also give you a more accurate assessment of the kind of savings you need to have in order to get there.
Not everyone automatically retires once they hit age 65. Many professionals and business owners like to wait until they’ve hit certain career goals before calling it quits. Often, this also means pushing off Social Security. When you push Social Security back after reaching full retirement age, you may get an additional 8 percent for every year you don’t take it (until age 70). Not only does this allow you to increase your future Social Security payout, it also means you continue getting a work income, which allows you to save more. Finally, this extra wait gives your savings more time to grow before taking distributions. But remember, if you have a Traditional IRA, even if you continue working into your retirement years you will have to take a required minimum distribution at age 70.5 and will no longer be able to contribute to the account at that time.
The kind of lifestyle you have in mind for your retirement will drive the amount of income you need from your retirement accounts and Social Security. The more modest your lifestyle goals are, the less money you’ll need. The more extravagant, the more likely you are to burn through your savings before your retirement is over.
Often, successful postretirement lifestyle goals are all about finding balance. For example, if your driving goal is to travel a lot during retirement, then you may want to downsize your everyday lifestyle. Live in a less expensive home, move to a cheaper state, and spend less on entertainment and other discretionary purchases between travels.
Your goals are the things that are most important to you. They give you a reason to get out of bed and be your best each day. Choose the right goals during your retirement and not only will you be more fulfilled but you may also be more financially stable.