Retirement is about more than money. You need to understand how you want to live the rest of your life.
Retirement is a major life event that needs to be planned for properly. This begs the question on many people’s minds:
When can I comfortably retire?
Financial independence is a prerequisite for anyone thinking about retirement. It’s the point at which your basic living expenses are covered by your passive income.
In other words, the amount of annual cash flow you require to keep a roof over your head, put food on the table, and pay for the basic necessities can be covered without you having to work to earn an income. The day you achieve financial independence is the day you no longer need to work in order to survive.
If you choose to continue working at this point you are working because you want to, not because you have to.
To figure out how much money you will need to have saved to consider yourself financially independent and/or to be able to retire, you should have a detailed financial outline created by an accredited financial advisor.
You need to have a good handle on exactly what kind of life you want to live. What you want to do in retirement and how much it will cost you. Until you do that, you will never be sure you have enough money.
Take your annual spending and multiply by 25.
They use a general rule of thumb that’s common to the financial planning industry to determine when they can quit working, based on achieving a level of savings equivalent to twenty-five times your annual spend rate, net of government pensions and work pensions.
Once you feel you have enough, you may want to keep working anyway.
Everyone’s situation is different and so are people’s levels of risk tolerance, comfort with investing, and the cost of the lifestyle they envision for themselves in retirement. You need to be very clear about your retirement goals. You need to get a handle on how you want to live, what it will cost, and whether you will have enough income to finance your life beyond work.
If you have any other questions about retirement and how you can be prepared please feel free to contact us.