Questions to Answer When Applying Retirement Formulas
December 16, 2016
Lots of formulas are available for calculating how much money you will need for retirement. They can range from multiples of 80-100 percent of your pre-retirement annual income, to savings in the millions.
Whether or not you decide to use these formulas, what is more important before you apply them is to have answers to a few critical questions. Every case is different, and those differences will lead to different answers when applying retirement formulas.
What is Your Target Retirement Age?
This seems like a simple question, but have you set a target date? If you hope to retire earlier, you will need to have more in savings. Also, keep in mind that many people end up taking retirement sooner than expected, due to unexpected life events or attractive retirement packages from employers. So, even if you do not plan to retire earlier, be prepared for any circumstance.
Where Will You Live When You Retire?
This is a huge decision with important financial and planning consequences. If you plan to sell your current home and downsize to a smaller residence, you may utilize long-term savings (while not forgetting the costs of relocating). But if you plan to move to a more expensive area, even if you purchase a smaller residence, there may be little or no savings over the long-term.
If you want to live in two places, two smaller residences may be viable, especially if you can rent one or the other out while you are not there. At the same time, dual residences may make it harder to manage costs.
Delaware is one of the best places to retire, because of the low cost of living and the numerous fiscal benefits for retirees. Regardless of whether you retire to Delaware, you should take a look at its benefits and compare them against other states, since this will offer you a broader perspective.
Do You Want to Travel After You Retire?
A lot of retirees plan to travel when they have more free time. Some travel may include visiting family and friends if they are not nearby or scattered. Other travel may take retirees to far-flung destinations which they have long dreamed of visiting. Whatever your plans, be sure to factor in these costs, both one-time and annual costs. If you plan to purchase an RV, make sure you factor in the purchase price, plus gas and maintenance.
What are your Hobbies and Activities?
Some are very inexpensive, like hiking and bicycling, while others like golf and tennis may require ongoing membership fees, as well as equipment costs.
If such activities are important to your lifestyle, you may want to consider some of Delaware’s top retirement communities, which provide great amenities as part of the cost of home purchases.
These are just a few of the important questions that you should ask yourself before making retirement income calculations.