Should Retirement Be Hard Work?

Finally, retirement! Finally, there will be time to relax! Finally, you’re free from financial worry! Not so fast, though.. While many people think of retirement as a welcome break from the 40-hour workweek, without careful retirement planning, you may actually need to work harder and longer than you imagined during your so-called retirement years. It may be safe to say that, when it comes to retirement, the best-laid plans are made well before the traditional retirement age of 65.

Know Your Resources

How many times have you said, “I’ll do that when I retire,” expecting plenty of free time to pursue your passions after liberation from the 9-5 work schedule? Many people envision retirement as a time to travel or pursue hobbies and special interests. But, have you considered the cost of not working? A general rule of thumb is that you should have enough saved to replace60% to 80% of your pre-retirement income to maintain your lifestyle during retirement. Careful planning now can help you maintain your desired lifestyle during retirement, as well as help ensure that you have the resources in which to do so.

For many, Social Security, employer-sponsored retirement plans, and personal savings are the primary sources of retirement income. Most people don’t realize that Social Security was not designed to be the sole source of income for retirees. Its intended purpose was to be  one component of an overall retirement income package. Because of this, many workers rely on an employer-sponsored retirement plan to provide substantial income. It is likely, however, that both of these sources will need to be supplemented with personal savings to help provide enough income to meet your retirement goals.

Put Time on Your Side

Early retirement planning puts time on your side. It is never too early to begin saving and never too late to start. In fact, one advantage of early retirement planning is that you have a longer period of time before retirement, which allows you a great opportunity to increase savings through potential growth.

An equally important consideration for retirement planning is the reality of inflation, which can affect even substantial savings. For example, a modest 4% inflation rate, maintained over 15 years, reduces the purchasing power of $250,000 to $138,816. Starting early may allow your savings to outpace inflation.

Although it can be difficult to imagine a time when you will not have to sit on the beltway every morning, the day may arrive sooner than you think. Begin preparing for retirement now—even if it seems a long way off. With time on your side, the best-laid plans may help ensure future financial well-being for you and your family.