Retirement is a major lifestyle change and not everyone is prepared for that change.
Planning for retirement is not always easy. Creating a realistic retirement plan requires that you know what you want. Most people are focused on the financial part of their retirement without giving enough thought about what to do with their time once they retire.
You need to figure out what you want to do in retirement and how to prepare for it. Because preparing well in advance will make your transition into retirement less stressful. After all, you will be retiring from work not life.
The important thing to remember is that the retirement plan is not something static you can put on the shelf and forget. It is a reflection of our ever-changing lives, goals, and dreams. If you have not given enough thought about your retirement years, maybe it’s time to start now. After all, if you want to have a happy retirement, you will need to plan for everything.
If you want to learn about why retirement planning is important, I have created a list of the 9 most important reasons.
1. To Prepare for a lifestyle change.
Retirement changes your life, and you need to prepare for it.
Some people may want to continue their lifestyle just as it is today. But others may plan to drastically change everything and go with something new and adventurous. Or you are somewhere in between.
What you dream about today might be totally different from what you decide to do when you retire. But whatever you decide to do in retirement, make sure that it makes you happy.
2. To Maintain your standard of living.
Knowing your financial situation is key when planning for retirement. You want your current lifestyle to continue even after retirement.
Today, your current expenses are covered by your monthly paycheck. After you stop working you want to make sure that your day-to-day expenses are covered by a regular income stream. It is not going to be your employer paycheck anymore but a combination of Social Security benefits, pension (if you are lucky), withdrawals from your retirement accounts such as 401(k), IRA, Roth IRA, and retirement savings.
It is important to know what you can financially expect when retired and how to invest and save money while still working. You need to have a clear picture of how much your nest egg is enough to retire comfortably.
You will find some helpful tips reading these articles:
- How Much a Nest Egg Is Enough to Retire Comfortably?
- 7 Simple Ways to Pay Yourself in Retirement
- 8 Budget Categories You Will Spend More in Retirement
- 5 Best Ways to Withdraw from Retirement Savings
- How to Cut Expenses Before You Retire
3. To Be prepared for a longer Life.
When you are planning for retirement, you want to know how many years you need to cover financially.
Estimating your longevity will help to determine how much you can spend and how much time you have to enjoy your golden years. Our baby boomer generation will live longer than any previous generation. And that long and healthy life will cost money.
According to Social Security Administration, a 65-year-old man can expect to live until 84 and a 65-year-old woman can expect to live until 86.5. And those are just averages. Many baby boomers will live past age 90.
The fear of running out of money in retirement is one of the most discussed on personal finance sites. Many things could go wrong in your retirement years like long-term illness, death of the spouse, economic and stock market recessions.
If you do not have enough money to cover the expenses, it will affect the quality of your life and put a lot of pressure on you and your family.
4. To Prepare for unexpected life events.
Anything unexpected can happen during your life.
You can plan all you want but your life can take a turn when something unexpected is happening. It is better to be prepared for it financially. You would not want to depend on your family in case of any medical or financial emergencies. You should always have an emergency fund that will keep you prepared for unexpected life events.
The rule of thumb is to save 3 to 6 months of living expenses in an emergency fund. But it is recommended to save up to 12 months. Keep in mind that retirees are not technically at risk of losing their income from a job since they have stopped working. But they could still find themselves in a position where they need funds quickly.
The best places to put your emergency savings:
- Money market deposit accounts
- Money market mutual fund
- Online savings account
- Bank savings account
- Certificate of deposit (CDs)
Saving your cash in a traditional bank savings account is one of the safest ways to go if you are not comfortable exposing your money to a higher risk of stock markets.
5. To Avoid unnecessary stress.
It is not a secret that many retirees stress about their financial situation and if they have enough saved to retire comfortably.
This makes sense because running out of your savings fast would leave you dependent on Social Security alone. And these benefits do not provide enough to live on. When you are under that much pressure, your entire quality of life and health suffer. You might find it difficult to eat, sleep and enjoy your life.
But by planning in advance, you will be able to set realistic retirement goals and then estimate the amount of money you will need. This way you should be able to pursue your new hobbies and activities without any financial dependence.
In the end, creating a retirement plan where you look at the lifestyle you want in retirement and then at how financially to support it will help you avoid stress.
6. To Find happiness in retirement.
It is a well-known fact that many retirees struggle to find happiness after they leave the workplace.
The main reason is that they do not have a retirement plan besides the financial part of it. A lot will change once you are no longer working.
Many people have to create a new social circle because their social activities were work-related. Also, as a new retiree you have to create a daily schedule because you do not need to go to work anymore. Additionally, many people are not aware that they often need to find a new identity for themselves while transitioning to a new phase of life.
Just remember that every life change comes with emotional discomfort. But preparing in advance will help you with the transition from a working life to a life filled with leisure.
You should think thoroughly about how you want to spend your time. So, you can make the most out of it. When you do not have a plan for how your retirement should look, you will probably find yourself depressed and disappointed or waste your days with unrewarding activities. But if you are truly in sync with your new lifestyle, you will find happiness in retirement.
7. To Fulfill your retirement goals.
The lifestyle of today’s retirees is different from the lifestyle of their parents. Today’s retirees are very active. They travel, volunteer, play sports, or start new businesses. They like to spend their time with family and learn new technology or skills.
When we have a lot of free time ahead of us, we start thinking about what we would like to do with it. Sorry to say but often life takes over and we may focus more on day-to-day chores and less on our goals.
However, it is a proven fact that people who set their goals achieve more in life than people who do not. Even in retirement, setting goals will help us define what we want to learn, explore, and accomplish.
I would encourage you to set up short and long-term retirement goals. Because goals provide direction to the future. Goals can offer a new sense of purpose and practically force you to commit time to something each week that is just for you.
The important thing to remember is that having a goal means you know where you are going and what it takes to get there.
8. To Complete your bucket list.
Retirement is a time when you can do all the things you want.
In many cases, people do not know what they want to do once they are retired. This is the reason why you need to start planning for your retirement. Because if you know what you want to do, you can start preparing for it.
Creating your bucket list is the simplest way to figure out what you want to do in retirement.
A retirement bucket list is a list of all the things you want to do when you retire. Start by creating a list of all your dreams you want to achieve. Sometimes it can be challenging to create a bucket list. But do not limit yourself, and do not hesitate to put your wildest dream on paper. You can always decide later if there are things on that list that have to wait for a while before completing it.
If you are looking for inspirational ideas for your bucket list, read my article:
9. To Leave a legacy.
Many people feel it is important to leave a legacy.
You have worked hard to build a life of comfort for you and your family. In the end, you want to make sure that this level of comfort lasts for years to come for your family when you are gone.
Leaving a legacy is not mandatory but gives us a greater sense of purpose while living. You may hope to be remembered for your actions and provisions by those who survive after your death. This type of planning asks you to envision how you want your money to be used and where it can make an impact.
Here are a few related posts you might want to read:
- How to Organize Your Time in Retirement
- How to Create Retirement Lifestyle Goals
- 4 Key Ingredients for a Successful Retirement
- Practical Tips to Make a Smooth Transition to Retirement
- How to Adjust to an Empty Nest Lifestyle
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