When we hear the words “retirement plan,” we usually think of our employer’s 401(k) plan, a traditional or Roth IRA or a pension, but it is so much more than that. Whether you will retire in five or ten years, you need to start thinking about your entire retirement plan. Where will you live? Will you continue working? Will you travel? What kind of lifestyle do you want to have? Will you have a hobby or volunteer? When will you start taking Social Security benefits? It might sound like a lot to think about now if you are still several years away, but the answer to each question for your FULL retirement plan might determine how much you want to save now.
Where will you live? Will you continue to live where you do now? Do you plan to live near family? Move to a smaller/larger house in another city? What is the cost of living there? Will you live in a warm or cold climate? Will you be part of a lively culture and have access to recreational activities?
Will you continue working or try to volunteer? This might also determine where you choose to live. What is the job market like there? Do you have opportunities to volunteer for a cause near and dear to your heart?
Will you travel? What kind of lifestyle do you want to have? Do you plan to take vacations often? If you spend an average of $2,000 for each trip and go away five times a year, that will cost you $10,000. Maybe you will spend half the year in your home and the rest of the time at a beach house. Will you take up any hobbies? According to Golf News Net, the average cost to play a round of golf is $61. If you play once a week, it will cost you $3,172 a year!
When will you start taking Social Security benefits? You can start receiving benefits when you become eligible at 62 but at a reduced rate of 70-75%. If you wait until your full retirement age, you will receive your full, unreduced benefit amount. How will this factor into your cash flow during your retirement?
Have you ever considered all these different pieces when you think about your retirement? As you create your plan, keep in mind that if you are age 50 or older, you are eligible for catch-up contributions for a traditional or Roth IRA. Thus, you may contribute $7,000 a year instead of the maximum $6,000. With a 401(k) plan, you can defer an additional $6,500 on top of the $19,500 contribution per year. We are always more than happy to sit down with you and help you answer the questions above and figure out your Retirement PLAN!