Establishing a Retirement Plan
Retirement Planning involves all activities from your first employment, up to and after your retirement geared towards ensuring that you and your needs are well provided for in the retirement phase of your life. In drawing up a retirement plan, it is critical to identify the following:
- When you will retire: Depending on your outlook, and personal circumstances, people may choose to retire early, say before 50 years, while others will retire later, just at 60 years, or for however long their terms of employment permit. Many factors including your state of health, desire to pursue other activities, and very importantly the level of financial resources and responsibilities will affect the timing of your retirement. For some others, however, the timing of retirement is not entirely up to them. Sometimes accidents, ill-health, and employer-distress may lead one to a pre-mature retirement.
- What you will do during your retirement: During retirement, some people choose to continue in very active work, supporting their communities, participating in politics or even running a full time business. Others on the other hand, choose to limit themselves to very light activities, if any at all, and prefer to spend their retirement traveling, visiting children and grandchildren, etc. It is important to plan ahead on how you will like to spend your retirement, and prepare yourself mentally and financially for whichever route you choose to follow.
- What kind of income you will need in retirement: Planning adequately for your financial needs in retirement is very important. It is therefore necessary to ascertain ahead of time, how much income you will need in retirement. In planning towards this, one may have to gauge his family responsibilities, state of health, and expected life expectancy. For example, if you still have children of school age during your retirement, your financial needs will outstrip those who do not. If you already live in your own house and will not be paying rent during your retirement, then your financial needs will differ from someone who does not own a house.
- What kind of income you can expect in retirement: Once you have ascertained your financial requirements in retirement, it is necessary to estimate your income streams to be available in retirement. For someone that has planned his retirement early enough, this could consist of income from investments such as dividends, capital appreciation, rental income as well as pension and other retirement benefits. Estimating your sources of income is important to enable you plan how to meet your living requirements in retirement.