This article discusses two important topics about retirement: replacement ratios and withdrawal formulas.
While well-intentioned, adopting either or both can severely damage your retirement.
The better approach is to determine what your current retirement savings can translate to in guaranteed lifetime income.
That’s what you have to spend. Consider that your “retirement allowance.”
If you can’t adjust your lifestyle to fit within your allowance, then economize, save more or move.
If you want to leave a legacy out of these savings, your allowance will have to be smaller.
With our changing times, many of the “old ways” of thinking of things are being challenged. Longevity used to be considered a risk factor for retirement planning. But there’s so much more to it than that.
Retirement is not only about money. It’s also about what you do with your time. Having the freedom and flexibility to spend more time volunteering, connecting with friends and family, etc. all goes far in securing the emotional well-being of a retiree.
However, to devote your time to things that give you pleasure, you have to figure out a financial plan that’s on automatic pilot–at least, when you start the second stage of retirement.
So, what would that look like? Well, it would include monthly checks from Social Security, any pension, income annuities and dividends on any stocks.
Essentially, it would be income that comes in like clockwork, where you don’t have to sweat about the Dow Jones or interest rates.
Just enjoy yourself. Isn’t that what you worked so hard for?