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Questions People Ask Before They Retire

Questions People Ask Before They Retire

By Gary Foreman

No matter how you look at it, retiring is a major change in your lifestyle. For many, it’s something that they’ve been looking forward to for years.

Looking forward to retirement and being ready for it are two different things. So let’s look at some of the common questions that people ask about being ready for retirement.

Q: What’s the most important financial question for someone preparing for retirement?

A: The most common question is, “Will I have enough income to enjoy the retired lifestyle I want?

Most of us have worked for 40 or 50 years, and we’ve looked forward to retirement for quite awhile. Now we don’t want to be disappointed. There’s nothing worse than not having the money to visit the grandkids!

Q: How can we know if we’ll have enough income to support our expected retirement lifestyle?

A: It’s easy enough to estimate your income and expenses after retirement but it does require a little math.

Begin by estimating your income from pensions, Social Security, investments, and retirement plans. If you have a DB pension, it will likely pay you a set amount each month. The same is true with Social Security. As a rough estimate, you can expect to take about 4% of the value of your investment and retirement accounts each year as income.

Next, estimate your expenses. Historically, planners suggested that your after-retirement expenses would be about 80% of what they were pre-retirement.

More recently planners are heading away from this estimate. They recognize that today’s retirees are more active than in the past and that means that they spend more.

So they’re suggesting that you start with your current expenses, subtract expenses that will stop when you retire (work clothing, work lunches, cost to commute, etc.). Then add any new expenses (additional travel, entertainment, hobby expenses, etc.) that will begin when you retire.

If that’s too complicated just assume that your expenses will remain relatively unchanged when you retire.

Q: What’s the biggest financial concern for baby boomers?

A: By far, it is outliving their money. According to a recent Marketwatch survey, 43% feared running out of money in retirement. It was their top fear.

Also Read: Are You Afraid You Will Outlive Your Savings?

Q: Most financial planners encourage people to be debt free by the time they’re 50. Why is that?

A: Debt can be a budget buster in retirement. For most of us, our major expenses are housing, auto, food, and debt. Ideally, by the time you’re 50, you won’t be making mortgage, auto payments, or repaying credit card debts. Without those bills, you can really boost your retirement saving!

And it’s even more important after retirement. Your post-retirement income will go much farther if the biggest expense in your monthly budget is food.

It’s no surprise, but retirement is a major lifestyle change. And that change will go much more smoothly if you’re prepared for it.

This article originally appeared on The Dollar Stretcher.com and was reprinted with permission.

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Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money and CreditCards.com. The site features an active section for baby boomers that's updated weekly.