If you’re approaching retirement age, it’s time to get introspective. And no, we don’t mean debating the potential social ramifications of wearing sweatpants 24-7. We mean it’s time to ask yourself some hard questions about the nuts and bolts of retirement. Below are three of those questions to ponder before riding off into the sunset.
How will I live in retirement?
With retirement approaching, you want to consider how you’re going to live once work is no longer part of your life. Do you want to move? How much time do you plan to spend traveling? Is it time to downsize your residence? Do you have friends who are retiring? That last one is important, as research has shown. Retirees who know other retirees rate their post-work lives as much more satisfying than retirees whose friends are still working. So, take a hard look at your future life not only to figure out how much this new phase of life is likely to cost, but to get an understanding of your world in retirement.
How much debt do I have?
If you have debt, make sure you have a plan for what you’re going to pay off when — and that you put that plan into motion well before you retire. It should be obvious, but the more debt you have in retirement, the more retirement money you’re going to need to pay things off. If you have high-interest debt that isn’t tax-deductible, like credit cards, pay those off first. If you have a mortgage, refinance it to get the lowest interest rate possible.
Will I be able to generate enough income to maintain my lifestyle?
Even if you have a giant lump of cash in your retirement account, that’s still not a good indicator that you’ll be able to continue how you’re currently living once you retire. As Money reports, a $500,000 nest egg will only kick back an inflation-adjusted annual income of $20,000. Instead, you want to focus on figuring out if you’re on pace to replace enough of your pre-retirement income to allow your lifestyle to continue once you stop working. To do that, use a tool like T. Rowe Price’s retirement income calculator. You enter all your variables and it gives you a look at your chances to keep up your lifestyle during retirement. If it’s not a high percentage, consider altering investments, saving more, or working a few more years.