6 Questions Your Retirement Plan Should Be Able to Answer

In 2022, the state of retirement in America isn’t particularly solid. Some 80% of Americans expect they’ll continue to work after retirement. A whole third of Americans fear they won’t have enough saved for retirement. Shockingly, 22% of Americans don’t know how U.S. retirement funds work or where that money is invested.

And 43% of American workers just guess how much money they’ll need for retirement.

But don’t let these statistics scare you – it all comes down to what you and your family do to prepare for your Golden Years. Paying for retirement doesn’t have to be burdensome. When you ask the right questions and approach with due diligence, you’ll find freedom, not stress!

Essential Questions to Ask Before You Lock Down Your Retirement Plan

1. Under what circumstances do I plan to retire?

When do you want to retire? What goals do you want to achieve first? While some people will just retire at the arbitrary age of 65, you might have other plans in mind. Retiring earlier will demand more of your investments and savings. Determine what must happen before you retire: do you want to maximize retirement benefits? Get the kids through college? Pay off your primary residence?

If you can pinpoint the conditions necessary for you to retire happily, you’ll have a better idea of the timeline needed to meet those conditions.

2. What expectations do I have for my retirement lifestyle?

Some people retire and remain virtually unchanged. They don’t move, they don’t drastically alter their activities or interests, and they pretty much know what to expect from their cost of living. But you might not be that way. Some retirees will want to spend a lot of time traveling, both to exotic locales and to visit family. Others will want to move to an entirely different place.

Looking into where you want to be and what you want to do. Knowing what to expect from the associated costs will give you that much-needed reality check that will give you appropriate benchmarks to achieve the lifestyle you want!

3. How much income will I need weekly, monthly, or annually during retirement?

Too many American workers guesstimate their retirement needs. If you want to be financially prepared, you need more than guesswork to back up your numbers. Once you know what kind of retirement lifestyle you’re after, you can better assess the potential costs of living. There are plenty of retirement calculators out there, like this straightforward one from Vanguard. Utilize them. Talk to financial planners. Nail down some real numbers for income expectations.

Being specific and realistic in your goal-setting means you’ll be better equipped to meet those goals before you retire.

4. Where will my income come from?

Retirement income can come from any number of sources. Pensions, work-sponsored retirement plans, IRAs, and 401ks are common models. One important consideration, however, is how these different sources payout. Too many retirees wind up on a fixed income – that is, relying on savings or other finite accounts. With people living longer than ever and inflation working against your savings, that means less and less to live on each year.

What you need in retirement is passive income. If you’re generating cash flow, say through investing in real estate, you’re able to earn throughout your retirement. Instead of depleting the wealth you’ve spent so long building up, you’ll continue to earn it.

5. How big of a safety net should I establish for health-related costs?

As we age, health problems tend to increase. Part of your emergency funds should go towards both expected and unexpected medical costs. Think about your family history. Is cancer a likelihood? How about heart problems? Is your lifestyle putting your health at risk? These are various factors that may influence how much money you’ll need to cover medical spending while also maintaining the quality of life you desire.

6. What are my estate planning needs?

We don’t like to talk about death. And honestly, retirement isn’t particularly close to when we expect to die these days. However, it’s always best to be prepared, particularly for the sake of your spouse and family. Consider your will, estate planning, medical directives, and end-of-life care. Plan and prepay for your funeral to reduce the burden on your family.

And, when you’re thinking about retirement, think about these costs, too!