Think of retirement as a new life chapter, a time to say goodbye to the responsibilities of your old life and step into the unknown. But, retirement isn’t scary. It’s exciting! It’s a time to spend more time with family and friends, read more books, spend more time outdoors and pursue your long-term goals.
But, that doesn’t mean that retirement is easy. Finances, family dynamics and housekeeping will all be challenges you will face as you transition into retirement. This Ultimate Guide to retirement is here to help.
From understanding different types of retirement funds to planning for post-working life, you will find everything you need to know about retirement.
What is retirement?
Retirement is the end of a person’s career. This word is often used interchangeably with retirement, but it’s important to note that retirement is a specific period of your life. At some point, you will stop working and start living off of your savings.
While it’s true that you will no longer have a salary coming in every month, that doesn’t mean that your financial life will come to a halt.
You will continue to earn money through investments, inheritance, and other extra activities. You will just have less money coming in than you had when you were working.
Why do we retire?
If you ask most people why they retire, they will tell you they want to. In fact, many people retire because they are sick and tired of working. But, why do you decide to end your working life?
The two main reasons are health and finances. You may retire if you’re sick or you may retire because you no longer want to work. The reasons you retire will depend on your own personal situation.
Retiring for health reasons can be a good thing, but it’s important to be aware of the potential downsides. You may retire because you’re ill, but you may end up having to take a shorter retirement because of it.
People often retire because they are sick or injured. However, some people may retire because of a disability.
How much do you need to retire?
Most people think they need a lot of money to retire, but that isn’t necessarily true. You don’t need a massive amount of money to retire. In fact, the average person with an average income can retire on less than $100,000 with a few smart strategies.
The 5 types of retirement funds
Before you start saving for your retirement, you need to understand what retirement funds you have available to you.
There are 5 main types of retirement funds and understanding which one is right for you is important.
Regular Savings – This is the money you put into your regular savings account.
Term Investment – This is an investment that you make for a specific period of time. It goes away when the time is up.
Regular Income – This is a regular paycheque that you receive every month from your work.
Inheritance – This is money that you receive from your family after you retire.
Emergency Fund – This is your insurance policy that helps you financially if something bad happens.
How to save for retirement
Before you start saving for retirement, you need to first determine how much you will need to retire. This is an important step, as it will help you determine how much you need to save.
You can calculate how much you need to retire by looking at your monthly expenses and seeing how much they are as well as how long they will be. Another way to calculate how much you need to retire is to look at the amount of savings you currently have.
This is because you may not have enough savings to retire on your own. You can calculate how much you currently have in your savings account by looking at your bank statement or credit card statement.
You will want to take out any unnecessary purchases from there so that you can accurately count your current savings.
The key to successful retirement
Retirement may be exciting and filled with possibilities, but there are some key considerations you should keep in mind as you get ready to retire. Chief among these considerations is that you need to have a comfortable financial buffer between your current savings and your ultimate retirement expenses.
One way to do this is by creating a financial emergency fund that is separate from your regular savings account. This emergency fund should have enough money in it so that you have enough money to cover any unexpected expenses that may arise during your retirement years.
How do you calculate how much money you’ll need to retire?
The easiest way to calculate how much money you’ll need to retire is to use the 4% rule. The 4% rule is a rule that says that you need to withdraw 4% of your savings at any given time.
The 4% rule is a good rule of thumb because it allows for flexibility. You can always adjust this rule once you start withdrawing money from your savings. You can calculate how much you need to withdraw from your savings by looking at how long you’re going to be retired for.
For example, if you’re going to be retired for 30 years, you’ll need approximately $1 million. If you’re going to be retired for 30 years plus inflation, you’ll need approximately $1.5 million.
If you’re going to be retired for 30 years plus inflation plus the length of your spouse’s working life, you’ll need approximately $2 million.
Retirement is a wonderful time to spend time with family and friends, pursue your long-term goals and read more books. Those are wonderful things to do, but it’s also important to remember that it will be challenging. Finances, family dynamics and housekeeping will all be challenges you will face as you transition into retirement. This guide will help you with each of these.