How Do I Know When I Can Retire?

We frequently have conversations with clients about when they can retire, and there really is only one way you can be 100% sure that you’re ready – by doing a retirement plan with a matching budget. A comprehensive retirement plan will take into account a number of factors, some of which people often forget. A good plan will look at a reasonable inflation adjusted income needed each year in retirement and then balance that with where the money is coming from, such as investments, social security, pensions, and other savings.

All of this then needs to mesh with an honest budget of your expected expenses during retirement. While your advisor can certainly help with this process, only you can estimate with any accuracy your normal living costs, your mortgage, what you will need for taxes, how much you expect to spend on gifts, and any other expenses you will incur. Your advisor can then help fill in the gaps and make sure there aren’t categories you are overlooking that are common for retirees.

The key to all of this is trying to match up the timing of your income in retirement to the expenses as you expect to incur them. Once you have a good grasp on your expenses and know when and where the income will come from, you will be able to make an informed decision about when to retire and be confident in your choice.