Give retirement a great deal of research, planning

July 3, 2013 

I spend a lot of time with pre-retirees who are trying to determine whether they can afford to retire. They really, really want to but have a nagging sense that they may be missing something. So together we work through the numbers and determine if they are prepared for the biggest financial decision they will ever make.

Here are some of the biggest obstacles I see facing many of the pre-retirees that I meet:

1. They don’t know how much their lifestyle costs. Many pre-retirees are used to saving a chunk of their income, and spending the rest. It’s a big deal to go from a household income of $80,000 a year, to an annual income of $40,000. What expenses will they cut, and will they be happy living on this lower income? Before retiring, track your household spending for 30 days, review where your money’s going, then determine what your monthly retirement income needs are and whether you really want to give up your current income.

2. They don’t know how much they need to save. According to a 2013 Retirement Confidence Survey, “Only 46 percent of workers report they and/or their spouse have tried to calculate how much money they will need to have saved by the time they retire.” You need to project your income from Social Security, pensions and savings/investments, and determine whether this will provide enough income for the future.

3. They still have debt payments. Whether it’s a mortgage, car payment or credit card debt, retiring with debt means you need more cash flow each month to make ends meet. According to the same survey, “55 percent of workers and 39 percent of retirees report having a problem with their level of debt.” Visit www.bankrate.com and use their financial calculators to determine how much extra you need to pay toward debt to extinguish it before retirement. Being debt-free at retirement means you’ll require less income, and you’ll have less stress.

4. They do not consider the cost of health care. When I meet with retirees, they tell me how much they spend on insurance premiums and prescriptions. They are usually surprised at how much these items cost. And, if they are caring for an aging parent, they are shocked to learn what assisted living and skilled nursing care cost. Pre-retirees are usually used to an employer-sponsored plan, so don’t realize how expensive health care can be.

5. Their spouse doesn’t want them to retire. Yes, I see this. According to a survey from the Wall Street Journal, three out of five married couples disagree on the timing of their retirements. This usually means that one spouse does not believe the couple are financially ready to lose the income of the retiring spouse, or, they are concerned that their spouses are not emotionally ready to give up their careers.

6. They have to work part-time, or take Social Security at age 62, or start taking distributions early. This means there is already an income shortfall, which will only get worse because of inflation. I visited the Bureau of Labor Statistics website, www.bls.gov, and if you could afford to live on $2,000 per month in the year 2000, it would take $2,705.52 today to cover those same expenses today, because of inflation only.

If you are thinking about retiring this year, download our free Consumer Guide to help you work through the numbers by visiting: www.canIretire2013.com.

Sherri Goss is vice president of Rosenberg Financial Group Inc., with offices in Macon and Warner Robins. Contact her at 922-8100 or sherri@rfmoney.com.

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