A friend asked me last week if I thought she was in a positon to quit; retire this year. We worked through her situation and I’m happy to share that, YES, she can become a quitter and retire.
It made me think that others might be asking the same question, “Can I retire now?” I don’t really like the word “retire”; I think of it more like a “start” to the next uncommon phase of your life. But we’ll leave that discussion for another blog day.
I realize many of you reading this aren’t at that stage of your life yet, however, if you start to understand how to ask and answer the retirement question now, it will have a tremendously positive influence on your wealth building journey.
Here’s a very common sense approach to finding the answer:
First, you need to determine what would be an average annual cost for your retirement lifestyle. Establish your monthly list of living expenses, multiply that amount by twelve months and then add in any extra expenses you anticipate during the year, like travel, gifts, etc. This becomes a target for each year of your retirement.
Now, where will you get the money to cover your lifestyle cost?
The answer for most people will come from a combination of three money “buckets”:
Bucket 1-Retirement Monthly Income
These are monthly income payments from social security, retirement programs, pension plans, etc.
Bucket 2-Supplemental Income
Income you can count on each month from rental properties, part-time jobs, etc.
Bucket 3-Withdrawals from Retirement Investments
Monthly withdrawals from your retirement investment accounts.
Can they retire now? Can they quit?
Let’s use Joe & Judy’s situation for an example.
Joe and Judy estimate their average retirement lifestyle cost to be about $70,000 annually.
How will they pay for it?
Joe and Judy estimate their three money buckets will contain these amounts annually:
Bucket 1-Social security income will be about $30,000 (after taxes).
Bucket 2-Rental properties will generate $12,000.
Bucket 3– Withdrawals from retirement investment accounts will be *$38,000.
(*This represents a 5% withdrawal from their total of $750,000 in their retirement investment account. I recommend that you withdraw no more than 6%. The less, the better).
The total of Joe and Judy’s three buckets is $80,000 annually.
Can Joe and Judy become quitters?
Depending on your situation you’ll have to adjust your money buckets and your retirement lifestyle cost to fit within your financial situation. Obviously everyone’s situation is different, but the sooner we start asking the right questions, the sooner we can find the right answers. I want you to be a quitter or as soon as you can.
My Wealth Builder 10 is a great tool to assist you on your wealth builder journey. And my Financial Life Goal Calculator empowers you to track your own Financial Life Goal.
Remember folks, the sooner you start building wealth the right way, the sooner you can be a quitter. A quitter producing dreams that generate life and joy- That’s Common Sense to Uncommon Wealth.
Enjoy your dreams. NOW!
Jeff Pinkerton – Guiding Folks to Uncommon Wealth