What does retirement actually mean?
The government definition of retirement is when you can claim full benefits at a certain age. There is no consideration for your financial situation, money goals, health, or life expectancy by Uncle Sam. He doesn’t consider your retirement plans or how you would like to spend your golden years.
According to the dictionary, retirement means no longer working and living off your savings.
You’re likely to spend more time on leisure activities during this period. Linda Leitz, a certified financial planner and an Alliance of Comprehensive Planners member, says defining retirement according to your values and perspective is essential. The goal should be to lead a life you’re passionate about. Here are some tips on how to create a customized retirement plan:
1. Decide What’s Most Critical
The first step in defining retirement is figuring out what you will do with your newfound free time. Perhaps you want to travel the world, discover new hobbies, or use your skills to work part-time or start a side business. Next, you need to think about when you will stop working. The FIRE movement – Financial Independence / Retire Early – encourages retiring well ahead of the average retirement age. However, you might be able to delay retirement and stay in your workforce longer.
2. Estimate What Your Retirement Will Cost
After considering what retirement will entail and when you hope to start, you can calculate how much you’ll need to save to make it a reality. It’s not uncommon for retirees who plan to start businesses or live on cruise ships to have a different retirement budget than others.
Compare your estimated outgoing expenses to your estimated retirement income once you have calculated your budget. These include Social Security benefits, pensions, withdrawals from 401(k)s, withdrawals from IRAs, CD and cash savings earnings, inheritances you receive, and annuities you buy.