Monday, October 11, 2010

Thinking about retiring? Here are some questions to ask yourself.

Over a recent dinner and a couple of glasses of chardonnay, a friend of mine and I talked about retirement planning. Like me, a late-in-life divorce put her in an emotional and financial hole some years back from which she has only lately recovered. Now she's at full retirement age and wants to make a change but not necessarily to stop working, completely. She's ready, she said. to have more time to pursue the life she wants that will still include part-time work. I told her that I wouldn't and really couldn't tell her what to do but that I would ask her the questions that I asked myself when I walked away from a full-time job for the same reasons earlier this year.
Those questions helped give me the confidence to embrace a transition to retirement knowing that I could manage my money, cut my work hours but stay engaged in life, learning and living to the fullest.
Among my questions:
- What will a realistic household budget look like for you? This is a budget that includes the basic costs of mortgage, food, gasoline and insurance, but also discretionary spending on clothing, entertainment and travel.
- What's your debt load? Are your credit cards paid off? How much mortgage expense do you have left? Will you ever be able to pay that off? What else can you (should you) pay off before you leave your job?
- How long will your car run before you need a newer one? Where will that money come from?
- What's your Social Security monthly benefit? Any other regular income from a pension or annuity?
- What do you think you'll earn with part-time work?
- Do you have an emergency fund that will get you by for six months if something happens to your health?
- Have you figured in inflation and how it will eat away at your budget at say 3 percent a year? That's been the average over the past 30 years.
- What about health care costs? How does Medicare fit into the budget.
- How much are you financially helping your adult children? Can they get along without that help?
- What's your net worth....assets minus liabilities in the form of debt or other money owed? Are you under water or is there some equity there? What can you do about that?
- How close are you cutting it? What's your risk tolerance? Will you be able to sleep at night if you make a change?
- If the risk and stress out-weigh the need for a change, then plan accordingly and set goals that will get you where you need to be in six months, a year...two years, if that's what it takes.
Retirement is possible and once my friend starts digging into the details, developing a budget and estimating her realistic income, she'll be able to decide how to retire and when to retire. It's really a matter of thinking it through and getting comfortable with what she wants to do.
Seven months down the road from my own retirement, I do not have all of the pieces in place, but I'm getting there. My plan is on track and I'm sleeping well most nights.
For more
Financial expert Scott Burns, writing at offers an article on "How to Retire on $12,000 a Year." It's all about shared expenses. He points out that for four out of six elderly unmarried retirees Social Security checks represent 90 percent of their income.
Liz Pulliam Westen writes about "Money in your 60s, 12 Steps to Take."
Ginita Wall and Candace Bahr offer a great Web site at  Read their essay on "Why Women Need Retirement Planning More than Men." The reality is that one-third of women over 65 are unmarried and on their own, just as my friend is. It takes guts to face the future, embrace the realities of keeping a roof over your head and planning for the long-term. It can be done.

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