Retirement advertisements are usually very attractive. Consider this scenario of a man with a well groomed grey hair on a striped short and a colourful short-sleeve sitting in front of a sandy-beach house reading a real estate newspaper with a contentment smile plastered on his face. Sometimes there may be an equally beautiful grey-haired mama sitting beside him. Some really good advertisements leave you with that ‘happily-ever-after’ feeling. You will wish to retire if you hadn’t thought about it already.
But do all retirement plans end in success?
After decades of working for other people, it should be a huge relief to finally take the exit door and retire. Many years of work for yourself can also get to you. Age creeps up on you, making you slower and reducing your work productivity. While some may decide to take that step as soon as they get to the stipulated age of retirement, others might take it earlier or even delay beyond the stipulated.
What happens to you after retirement, how the rest of your story will end and when it does, depend on how you plan for your retirement. Are you prepared for retirement? To really get the best out of your retirement, start planning for it early. You may never be prepared for retirement, if you had to wait till you get too close to stipulated age.
Think about how much you will need in retirement and how much you have saved so far, how far can you live on that? All that decision cannot be comprehensively dealt with at the point everyone is expecting you to retire.
Financial readiness could mean re-evaluating your debt status. Do you have a good pension that includes health insurance benefits, good savings and low expenses? If you have made some investment in the course of active working life, your inheritance from the investments will be a healthy boost to making the decision.
Retirement according to an expert is simply about getting your budget and liabilities under control, then having a clear picture of the resources available to create the desired and consistent retirement income you need.
Bear in mind that while in retirement, you are required to leave an inheritance for family. So you cannot afford to blow your savings on retirement. Expenses may drop while in retirement which is why a post-retirement or mock-retirement budget and living off that budget before you retire is highly recommended. This can help you decide whether your budget is realistic and whether you can stick to it. Budgeting helps you curtail over-spending. All it takes is to understand what your cash flow will be like after retirement. Your budget should factor in prevailing inflation. Inflation affects the costs of goods in the future and reduces the purchasing power of fixed income sources such as pensions, fixed annuities, or long term care policies that do not have inflation riders.
You can also calculate the approximate income from all pensions and investments and then calculate your living costs and expenditure to set the budget you will need.
You may also consider moving your pension funds to less volatile investments as you approach your date. For instance, if your funds are largely tied to stocks and shares, a drastic reduction in the stock market might impact your income significantly. Bonds, real estate and private business investments might be less threatening. Furthermore, if you can help it, try to avoid collecting your pension funds as a lump sum to avoid attracting heavy taxation on it.
If you have health issues, try to find a solution before going into retirement, as this might constitute an avenue to deplete your funds.
You may not be ready to retire if you are still paying debts, like mortgages, car loans etc. Ensure these debts are paid before you retire.
FRANK ELEANYA
