When is the right time to hang up your boots? Your parents being government employees never had to plan it. Retirement was something that happened to them inevitably. Times have changed. Today, you have more authority on deciding the course of your life. Let’s take a look at your life. You are in your 20’s or 30’s, you have a well-paying job and a lifestyle to match with. You work hard and play harder. Your prospects in life look bright and shiny. You are content and happy. And your plan is to retire in your fifties and go to the Bahamas once in a year, or walk your dog through the pristine beaches of Goa, or just sit at home catching up with all the reading you have missed over the years. Of course, you can do it but do you have a plan? The one that equips you to handle your financial requirements fittingly in the years when you’re just going to sit back and enjoy.
The Evaluation Stage
Voluntary retirement is a major decision. Naturally, it involves meticulous planning. By the time you are in your 50s, your income reaches a peak and subsequently your tax burden also increases. The other important thing that deserves consideration is the high expenses that are likely to come your way in the form of children’s higher education and marriage. What remains is the kind of lifestyle you wish to have or the number of dependents you ought to support financially. Broadly, once you analyzed all these aspects, it will help you reach a ballpark figure and give you an insight on what it will take for you to retire at 50! Here are five things you need to consider, to ensure that you don’t run out of money or head back to the work life unwillingly (because you need money) during your retirement. Lets get you retirement ready.
Your Day-To-Day Expenses
Count everything; the money you spend on daily commute to your coffee breaks (you prefer having latte at the Barista or your filter coffee at the ‘tea stall’?) And make sure to include what you think ‘too small a sum to be counted’. For instance, the money you spend on laundry and ironing. Remember, in the end, what you regarded as a ‘small sum’ could turn out to be big enough to surprise you, when you don’t have monthly checks coming in.
Sometimes, the school fees seems to be big enough to upset your budget today. Imagine the expenses that you’ll have to incur when your younger ones would be college ready. Then, there are the special occasions, birthdays, holidays etc. Make sure you have separate funds to provide for your kids expenses, else you’ll never know when you would run out of your retirement fund. What you need to do is to take a hard look at all the possible expenses and then plan.
Either you will be pursuing a hobby or someone else in the family. In any case, you will have to bear the expenses; your expenses will increase depending on the hobbies. If you are into playing guitar, your wife may have a different hobby e.g., glass painting or snorkeling. Each of these have different kinds of expenses, and, together can be whopping. Remember, these hobbies/ engagements will be never ending, as 24*7 you’ll be on your own and you/ your spouse can definitely not sit at home all day.
Thanks to the advancements in medical science, the average lifespan has increased considerably. Imagine you retire in your 50s and go on to live till your 80s or even 90s. Calculating this could be a tough affair. You have to consider inflation and devaluation of money as well while calculating the long-term expenses. Don’t forget to count in the routine medical expenses that may come your way as you grow old. (regular medication will not be covered by your health insurance)
Till retirement, you have been earning on the one hand and spending on the other. There was a kind of balance you managed to maintain. However, post retirement, your income will nosedive whereas your expenses will more or less remain the same. You need to have a proper plan in mind to tackle this problem or you’ll end up in financial trouble.
Now, you have seen the major things that you’ll have to prepare yourself for retirement in your 50s. Start planning and move slowly and steadily towards your goal.