Unemployed people who may be considering early retirement must consider how much money is in their savings accounts and what type of retirement plans they have stashed away from previous employers. Three questions should be answered before anyone decides to retire, even given the difficulties that older applicants are having trying to find new jobs:
1) How long can I expect to live?
The answer to this question is crucial because every other question related to retirement hinges on it. Life expectancy is constantly rising and for baby boomers today the average life expectancy is currently hovering around 80 years. An early retirement could mean a substantial amount of income will be required to maintain one’s basic needs, without income coming in.
It is recommended by retirement experts to plan for approximately ten years longer than the life expectancy. If a person only plans their finances until they reach 80 years of age but then live to 100 years of age, there are going to be clear problems. So make sure to plan ahead.
2) What kind of lifestyle do I want to live in retirement?
A person’s desired lifestyle is the key to retirement planning. Consider everything one wants to do during the remaining years and factor that in. What kind of activities will be done for fun? What will the basic costs be for things such as rent, food, and transportation?
3) How much money do I spend in my life now?
How much money someone spends in an average year is a good indicator of how much a person will spend in retirement. When people retire – some costs decrease, but most costs remain constant. To calculate the true cost, a person should calculate out an average year’s expenses. Bank statements, bills, and other statements like credit cards will assist in accomplishing this task. It may seem daunting, but is necessary to get a full picture.
And if a person does not possess enough money, in sum, early retirement may not be the best option.
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