As I approach retirement I am looking at my finances and wondering when I should actually retire and will I have enough money to live on. Will I be financially comfortable in retirement? I believe when planning for retirement you should have two goals in mind.
The first is to have a nice nest egg in terms of having some money in your bank or credit union account. This could easily be the amount in a 401(k). If you have been able to keep from withdrawing money from your employer’s 401(k) plan you should have a sizable amount at the time you retire. But you don’t want to live on that money. If you have to withdraw money every month from your savings accounts to pay expenses you may run out of it. Then what will you do? Go back to work when you're 75!
This brings me to my second goal for retirement.
You want to have monthly income that is equal or better than the net monthly income you have now while you are still working. The key will be how you make up for the difference in your current monthly take home pay and the amount Social Security will pay you monthly. In most cases, the social security check will not be as much as your current net income. And that is the rub as they say.
For example, in my case, my social security monthly payment, as it stands today will be about 56% of my current monthly net income. Ouch! How am I planning to make up that difference? To me, that is the secret to retirement. Make sure you have enough monthly income to equal your current income from the job so that you don’t have to take money out of savings to live. The savings should be there for emergencies such as a major health issues not covered entirely by Medicare or nursing home expenses.
So how can you make up the difference? In my case, I plan to use several very diverse income streams. For example, I have a rental property. I purchased a small 1/1 condo that I rent and that provides me a monthly income. I also play in the stock market and have taught myself how to sell options. My goal is to perfect my knowledge of selling options, while I am working, so that when I retire, I will feel confident that I will be able to earn between $300 and $600 per month. I also have a spare room in my home that I currently rent to a nice young millennial that I met through friends who is very considerate, honest and quiet. All of these income streams will supplement my social security check and allow me to retire without having to work a part-time job.
I see lots of folks continue to work into their 70s. That’s not what I want to have to do when I retire. The key is to plan ahead, before retirement age is upon you.