13 Questions to Ask Yourself to Uncover Your Retirement Needs and Wants
by Sherry Hao, Controller, U.S. Money Reserve
Retirement can be daunting. Here are questions to ask yourself to figure out what you really want in your golden years.
Retirement is a time of relaxation and celebration. It’s a time to enjoy the fruits of a long and successful career, spend time with family and friends, travel, and enjoy. But how exactly do you save enough to make this vision possible? How do you plan years ahead of time for what you might want when you reach retirement? What should you prioritize? What changes might you need to make to your lifestyle? How much do you need to save?
These are all really vital questions to answer as you think about retirement, but you should focus on some key pieces of information as you plan and save. In simple terms, focus on your needs and wants. Separating the two can seem daunting, but here are 13 questions to help you hone your path to a fantastic retirement.
Determine Your Needs.
The first step in figuring out just what your retirement might look like is to take stock of where you are right now. Having a benchmark for the state of your current financial affairs will help determine the parameters that you should put in place to achieve the retirement of your dreams.
This step may look really familiar to you because I’ve written about before. It’s called budgeting!
A few things to consider when getting a handle on your current budget (as it relates to your future retirement) include:
- How old are you, and how long do you plan to work?
- How much money do you currently have saved for retirement?
- Based on your family history, do you have or are you likely to develop any medical ailments that might impact how much you need to save?
- Do you have children you’ll need to support financially when you reach retirement age?
- Do you currently own a house? How much do you owe on your home?
- What does your budget look like? How much do you spend on the basics like food, insurance, medical coverage, transportation, and other essentials?
These kinds of questions will lead you to a place where you can understand exactly how much savings you might need for your retirement years. This work will help you get a good idea of how much you currently spend, where your money goes, and what your current priorities are. It can also help shed light on the type of lifestyle you’re used to and what you may spend your money on during retirement. Finally, these budgeting questions give you a really good starting point to consider how your spending might change in retirement — and whether you plan to spend at the same rate or would like to reduce your spending to make your retirement cash last longer.
Once you have a good idea of what your spending looks like today, you can start to figure out just how much you will need for the baseline necessities during retirement. When planning, you should consider medical costs, housing, taxes, food, and other necessities the same way you do when building a budget.
Remember that as you age, medical and insurance costs can rise significantly. In fact, according to Fidelity, a couple retiring at age 65 in 2021 should have around $300,000 after taxes allocated for medical costs alone. Those costs are expected to rise each year, so depending on your current age and how much money you have set aside already, you may need to rethink your spending and saving habits now to ensure that you have plenty of money for your future retirement.
Another factor to consider is Social Security. Depending on your timeline for retirement, Social Security could look very different. If you’ve been following the news recently, you know that Social Security has been on shaky ground for many years. In fact, a recent story at CNBC notes that at its current rate, by 2034, Social Security will only be able to pay out 78 percent of its promised benefits. While that may seem like a time well in the future, the truth is that this will happen sooner than you think. The reality is that most workers shouldn’t rely on or expect Social Security to be there when they retire. It’s much better to be an active participant in your retirement plan and ensure that you have the money you need saved up well before you reach your set age for retirement.
Additionally, you should consider at what age you may want to retire. If you want to (or, in some cases, need to) retire early, you’ll need to fast-track your savings plan so that you can hit your target in time. You also don’t want to shortchange yourself by departing the workforce too early. After all, there are penalties for withdrawing retirement funds before you hit a certain age, which can deeply affect how comfortable you’ll be during retirement. Age can be tricky, too, since some people may become ill and need to retire sooner. By keeping your body and mind healthy throughout your life, you can help prevent these issues, but it pays to keep your age target in mind when considering your needs for retirement.
Finally, one of the biggest factors to consider about your retirement needs is how you want to invest your retirement funds before you reach retirement. You have numerous options for places to stash cash for retirement. Some conventional places include 401(k)s, IRAs, mutual funds, or even the stock market. Deciding where to stash your cash really comes down to your age, your income, and your timeline. It also may make sense to hire a financial planner who specializes in retirement to learn more about your options, understand what your needs are, and help you save efficiently for your future retirement.
Figure Out What You Want Your Retirement to Look Like.
Despite those harrowing-looking numbers ($300,000 after taxes just for medical expenses!), retirement is supposed to be something you look forward to, right? Don’t worry! We’re getting to that part!
Here’s the part where you get to dream big. Do you want to travel around the world? Downsize to a home or lifestyle that’s cozier and closer to your kids? Maybe you want to move overseas? All of these things are totally doable; they just take planning!
This is where you get to ask yourself the fun questions. Some important ones to consider include:
- How do you define “retirement”?
- Will you work during your retirement? How much income will you potentially bring in if you do work?
- Where do you want to retire?
- Do you want to travel during my retirement? If so, where and how? Via cruise ship? On luxury tours? Stay at Airbnbs or hotels? Buy an RV and camp?
- Do you want to be closer to family or friends when you retire?
- What do you want your social life to look like?
- Do you want to leave an inheritance for anyone?
These kinds of questions help you figure out what you really want your retirement to look like, where you might find some extra spending money, and what you might spend your money on during retirement. Remember, retirement isn’t necessarily a set-in-stone destination, so it’s important to revisit these questions regularly to find out if your preferences have changed.
While this list of questions deals with your wants rather than your needs in retirement, it doesn’t mean that these questions are any less important. These questions are just a bit more open-ended. They should largely be determined by you and should help you figure out a clear vision for what your retirement might look like.
The Bottom Line on Figuring Out Your Retirement Needs and Wants
Retirement can be a time of celebration, relaxation, and enjoyment — but you have to plan for it. Answering a variety of questions such as those listed here can help put you on the right path toward having a wonderful retirement. While it may seem daunting to try and save a ton of money, chipping away at it gradually over your working lifetime can make all of your retirement dreams come true. Yet without a goal, how do you know when it’s time to step out of the workforce and take a break? If you use the questions above as a jumping-off point for your retirement planning and perhaps seek out the assistance of a professional, you’re sure to be well set for your golden years.