Many people aspire to save $1 million, but will that amount be sufficient to support your ideal retirement? Your lifestyle, spending patterns, health, and the potential longevity of your savings will all influence the answer.
It can be useful to frame retirement as a set of questions to consider rather than offering a one-size-fits-all solution. You can better understand what "enough" might mean for you by considering these questions early on.
Questions to Consider
- Lifestyle: In retirement, how do you envision your day-to-day activities? Will you engage in hobbies that could impact your spending, travel frequently, or eat out frequently?
- Retirement age: How long do you want your savings to last? When do you intend to retire?
- Debt and obligations: Will you have a mortgage, loans, or other financial obligations when you retire?
- Health and medical expenses: How might your health impact your spending plan? What are the possible long-term care, Medicare, and premium costs?
Pension Decisions
If you have a pension, one of the biggest questions is whether to take your benefit as a lump sum or an annuity.
- Could a lump sum give you flexibility, or would managing that money feel overwhelming?
- Would an annuity provide peace of mind with guaranteed income, or would it limit your options?
According to Yuliya Brown, CFPⓇ, a fiduciary wealth advisor at the Farther Focus Team, “Deciding between a lump sum and an annuity isn’t just a numbers game—it’s about understanding your income needs, your risk tolerance, and your lifestyle goals. Exploring these options with a professional can provide clarity before making a decision.”
Thinking through these possibilities can help clarify what approach might fit your comfort level and long-term goals.
Understanding Key Risks
It can also help to reflect on the risks that may influence how long your savings last:
- Longevity: What is your potential lifespan, and how might that affect your perspective on withdrawals?
- Inflation: How might growing costs impact your way of life and your savings' purchasing power?
- Health care: How much could unforeseen medical expenses affect your budget?
- Withdrawal plan: Is the amount you would need to take out annually sustainable?
- Investments: How do you feel about varying degrees of risk, and how might changes in the market impact your savings?
Asking yourself these questions can help identify areas to explore further and give you a clearer picture of what retirement might look like.
Putting the Pieces Together
A thoughtful approach to retirement often comes from looking at all the pieces together: spending habits, savings, pensions, health care costs, and lifestyle priorities. Even identifying gaps or uncertainties can be useful, giving you time to consider different scenarios.
You should have a personalized income projection created to help determine whether you can comfortably afford to retire now or if it may make sense to wait.
Schedule a complimentary consultation with a Focus Team advisor to review your pension options, explore different retirement scenarios, and receive a personalized income projection to help you understand your options.
