You must have a plan
Sergey Nivens/Shutterstock Once you stop working, there’s little room for financial errors. You have to know what you want and need and have a strategy for getting there. Planning should not be viewed as optional.
“Look at your current and expected sources of income and expenses to determine what your cash-flow will look like during retirement and throughout your life expectancy. As part of this process you should establish your financial and retirement goals to determine how big of a nest egg you need,” explains Anthony Criscuolo, a certified financial planner with Palisades Hudson Financial Group.
For example, will you take a $20,000 vacation to Europe every summer or just visit the kids for the holidays? Having a defined target for your nest egg is one of the most important aspects of your retirement plan. Create a budget of your current expenses and then make adjustments for what you expect to change during retirement. Your mortgage may be paid off, but you may have increased medical expenses or more leisure expenses. Check out these tips from 11 people who retired early.
There’s no getting around doing the math
kudla/Shutterstock “Sixty percent of baby boomers today say they are more worried about running out of money than dying! No one wants to estimate their life expectancy, but it’s important to take this into account for proper planning,” says Shane Eighme, a financial advisor and partner at Shane & Shane Financial.
Online calculators can help estimate your longevity, but in reality, there are a lot of factors to consider—your current age, gender, health, and family history, just to name a few. You can help mitigate some of the longevity risk to your portfolio with proper planning.