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Getting Ready to Retire? First Steps

Updated: Dec 13, 2018

by William Sabin, CPA

Retirement Strategy

Retirement used to conjure up thoughts of not working and just watching TV - not so any longer. It’s now a journey, the start of something new and fresh. With the average retiree expected to live longer than previous generations, it’s key to ensure that you have enough income to meet your needs.

When would you like to retire?

Is it based on a specific age or maybe a financial milestone? Will it be a transition from full time to part time work?

Knowing when and how retirement will start is paramount to knowing how to estimate your wealth needs.

Estimating Your Income and Expenses

There are a few basics for those not quite at retirement:

1. Remember the value of compounding -save as much as you can as early as you can.

2. Always spend less than you make.

3. If you use credit cards, pay them off every month. No exceptions.

4. Make sure your investments work hard for you.

5. Put as much as you can into investments automatically each month.

To know if you will have enough, you will need to review your assets (net of liabilities), your income and expenses.

As you get closer to retirement, it’s important to start to plan at a more detailed level. Determine what you want to do on a daily basis, develop a budget (note your fixed and variable costs), and ensure how you will stay connected with friends are important things to line up before that big day.

In conjunction with creating a budget, you will need to determine what your income will be and where your spending money will come from. When you enter retirement, your spending money will come from various sources instead of a paycheck. Part time job, social security, pension, investment income are all potential sources.

As you review your expenses, there are a number of big factors that you might consider adjusting. Keep reading for a few important questions to discuss.

Where would you like to live?

We have lived in big houses and small houses.There are several advantages to live in a small house. It is less costly to heat and cool. Taxes are most likely less. It is easier to maintain. Pick the best state to retire – it could make a big difference in cost. Where you retire might have an impact on your medical costs –this is one of the biggest expenses you will most likely encounter.

What expenses will I have?

As noted above, you will need to look at your fixed costs and your variable costs. Another way to look at this is what expenses you must have and others that are more ‘nice to haves’ or wants. Things like groceries, utilities, transportation, health care, and housing are generally must haves. There are ways in each of these categories to reduce your expenses from turning up the thermostat in warm months, buying generic / store food brands, keeping your car longer,

and cutting out unnecessary costs such as landline telephone accounts.

Nice-to-have expenses are things like dining out, vacations, travel, etc. With visiting over 90 countries in my life, I'm all for traveling as much as possible.

There are ways to see the same things everyone else does for a fraction of the cost - shop airline specials, book hotels that are safe and clean but not expensive. Why pay top dollar for a fancy reception counter and a pool. If you vacation right, you will not be spending much time at the hotel anyway.


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