Can You Afford to Retire?
Can you afford to retire? It’s a question many people ask as they approach the end of their working career. If you have visited this website before, you know how much I absolutely love retirement. I planned for it from my first day of work and that is the truth. I never could quite figure out what I wanted to do for a living but I absolutely sure I didn’t want to keep working at any job that I had during my working career. They were great jobs and I am very thankful to have had them, but I knew as soon as I did not need the money anymore, I would be heading off into the sunset to enjoy retirement. So, I kept asking the same question you might be asking: can I afford to retire? I realized that the answer focused on two key factors and, although they may seem obvious, most people don’t take the time to fully explore each of the two steps you need to take in answering the question.
The first thing that must be done is to have an accurate budget that reflects the money you will need to live the lifestyle that you want, and compare it to the money that you know you will have coming in. You definitely should have the help of a financial advisor but that first piece is your decision, not theirs. Only you know how you want to live out your golden years and only you know your expenses. I don’t think people spend enough time planning their retirement. They will certainly focus on the finances, but they don’t consider what they’ll be doing with their time. That is critical in determining a realistic budget. There is one budget that will cover the bare necessities of living day to day but that probably won’t cover all the things you will start doing once you stop working. Do you want to play golf? Great, but that’s going to cost money that you need to budget for. You need to plan out your time and create your retirement lifestyle and budget because you probably won’t be happy if you just have enough money to get by. Does that mean you have to work longer? It might. It did for me. The financial crisis of 2008 was a killer for my investment portfolio along with everyone else’s. My dream of retiring at 62 got pushed out four years but it was the right thing to do. We haven’t skimped during our retirement years other than the shutdown caused by Covid. The question isn’t just: can you afford to retire, but can you retire at the level you want?
Can you afford to retire? It's an important question and the answer deserves further exploration.
Your financial advisor can help you with the other part of this first step, which is your projected income. They should be able to leverage some computer models that will tell you what you can expect based on the approach you want to take. Do you want to be conservative with your investments? Aggressive? Or something in between like most people choose. This will give you a basic answer to that question that everyone asks: can you afford to retire?
With that answer as a foundation, you’re now ready to consider the all-important next step which is to re-think the budget that you came up with! I know that sounds counter-productive, but it’s one of the smartest things you can do. I managed a lot of projects in my day and learned very early on that nothing goes as planned. My staff used to hate it, but once we came up with what we thought was a workable project plan, we started tearing it apart and looking for ways to make it better and more likely to succeed in reaching our goal. Your goal is to find out if you can afford to retire so you should start second guessing whether you have done enough to minimize your expenses and maximize your income. Have you considered downsizing or moving to a less expensive area? Is a reverse mortgage advisable in your situation? Are there life insurance policies that can be turned into income? Have you been diligent in reviewing your budgetary items to reduce your expenses as much as possible? Insurance policies for home and auto are prime candidates to realize some savings as well as cable, phone and internet bills. It may well be that cutting expenses may be the avenue to realizing the retirement lifestyle that you’ve dreamed about. Can you afford to retire? Looking at all the possibilities may take some time and effort, but it’s one of the smartest things you can do.
One area that I did not consider and wished I had was the possibility of increasing my retirement income with a business of some kind. I worked a lot of hours so the last thing I wanted to do was start a business but, knowing what I know now, there was a way I could have done it. The good news is that I started this business after I retired during those many months where we were all “quarantined” in our house. Remember that? Well, this website came out of that period and, what started out as a hobby, turned into one of my favorite things to do each day. I like to write and I love retirement, so this website was a natural thing for me to do. But what I found out was how many other retirees were doing the same thing and becoming quite successful at it. If you have a passion or a hobby that you really enjoy, why not consider turning that hobby into an income. There are many ways to do that. A website is just one of the things you can consider. If you doubt whether you have the skills to do it, trust me when I tell you that nearly everyone can create a website that they’ll be proud of. There are companies that make it very simple. You don’t even need to write your own content but, for me, that’s the part that I enjoy the most. Getting a commission check is also very enjoyable. The bottom line is that, as you look at your retirement budget and consider all the options, why not explore the possibility of having a little business that can generate some income and even write off some of your expenses? It may help you come up with some solutions within your retirement project plan. Can you afford to retire? I hope the answer is a resounding “YES!” because this part of my life has exceeded all of my expectations. Go out and make a plan. It’s time to Enjoy Retired Life!
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