MoneyDo: Set Retirement Goals.
Ask someone if they’ve set retirement goals, and you might hear a response that has something to do with travel.
While travel could fill many days of your retirement, in the end, it won’t fill the entire year. Even if you chose to travel for two months a year, you’d still be left with around 44 weeks that don’t fit under travel plans.
- Goal setting can feel paralyzing. Too often, people consider “how to get there” as part of goal setting, which will often make the process difficult and sometimes impossible.
- So, initially a least, focus on the goals themselves. What kinds of things will you do? Are there things you have to do? Do you have a bucket list?
- It may be important to consider that some of your current mental and social needs are met by going to work. What will you do to maintain interactions with people you care for? What about work will you miss – including money or psychological benefits like undertaking a challenge to reach a goal?
- Many of us want to maintain the same level of activity, be in the same social circles and maintain the same hobbies when we retire. .
1. Be honest with yourself about wants and needs.
One commonly-used practice is to take your list of goals and then put them into a matrix – a four-square box helping you delineate between what you want and what you need.
As rudimentary as the matrix is, it often helps to break your goals into a visual picture so you can understand the goals and yourself.
2. Get a rough understanding of a retirement spending goal
It’s easier than it sounds. Simply add up all the net “take home” pay coming into the household. Now subtract all dollars that were saved (not including savings that was withheld from your paycheck).
The answer is a rough idea of your annual spending, which estimates how much your lifestyle costs you annually and is a great starting point to establishing your retirement spending goal.
Now adjust your goal with expenses that might go away in retirement. Common items are the annual cost to raise your children, or perhaps your mortgage will be paid off in retirement.
Don’t feel like you must be exact here. Simple estimates can work just fine. You may also want to add expenses such as health insurance or travel goals. The result is an annual spending goal in retirement.
In the end, setting goals might not be as hard as you thought. More difficult is understanding how you’ll get there. Find an advisor you can trust to work with you on your newly-clarified goals.
