Retirement – can you afford it?

Retirement - can you afford it?

Retirement is something that many people look forward to whilst others dread it. That can be the difference between a planned or enforced retirement. This is the first post in a series of three outlining aspects of retirement. and we start with finances.

Getting started

As the Meerkats on the advert would say it’s ‘simples’.

  1. Work out your net income. That is likely to be  your pension.
  2. Make a list of all  your essential bills and add up the total- utilities, mortgage etc.
  3. Make a list of all other spending you would like to have and total them.
  4. You add up the totals for  2 & 3 and subtract them from 1
  5. If – 2 & 3 is positive you can increase some of the items in 3.                                                     If – 2 & 3 is negative you need to bring down some items in 3

This will give you a picture of what you can afford in retirement.

Having some idea of your financial situation when you are retired is something that really should be done a few years before you give up paid employment. It is no good waiting until the day they give you your gold watch to realize that you are not going to be able to meet you bills. It takes planning.

Retirement - can you afford it?

 

 

My husband retired very early at 47 and he has maintained very detailed accounts since then. This meant when I was considering retiring at 56, he was able to work out how much effect replacing my salary with my pension would make to us. I really didn’t want my life to change too dramatically so for instance if I wanted to pop out for coffee I didn’t want to have to check the bank balance. That said obviously we had to be careful but with planning it has worked.

This is an example of our basic balance sheet. Click it to enlarge

 

BILLS / DONATIONS. These are payments that we have commitments for; direct debits mostly. You will see however that it also includes a payment for ‘Hair’. This is to make sure we look OK in our retirement! It also includes the car insurance as we do a lot of travelling.

CASH / SPENDING which include groceries and everyday spending.

JOINT A/C This includes things you may want to save up for like Christmas, birthdays, eating out and holidays. This is the area that is changed if the bills go up or conversely if the pensions increase!

SAVINGS Finally, if there is anything left you can put it towards savings / investments.

This is our way of budgeting and is presented as an example. It is done on an Excel spreadsheet so as your bills change or your income goes up, you can make the necessary changes to keep your outgoings balanced to your income.

This type of exercise can be very worthwhile if you are thinking of retiring ‘before your time’. Often the finances are better than you think if you work out exactly what you need and can mange with.

How near to retirement are you? Have you thought about how you will manage financially? If you have retired, did you have a financial plan? Let us know below!

 

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16 comments

  • I have just taken voluntary severance from teaching and can claim my pension in September. Life is short and to be lived so I am looking forward to a less stressful life even though I won’t have the regular income. Will let you know how it pans out. I have a spreadsheet similar to Julia’s so watch this space!

  • I retired at 57, husband at 63. We are living comfortably on Social Security and have yet to touch our retirement savings. Life is good. ☺

  • My hubby and I were just talking about our retirement funds today. Would like to “retire” in the within the next 10 years.

  • I already know I won’t be able to retire until I’m 70 if I’m to receive full social security. I’m 50 now and I have a lot of structural problems due to working physical jobs my entire life. Luckily I’ve been able to mostly make a switch from working in a retirement facility to working as a home health nurse, one on one with pediatric patients. My sciatica has gotten somewhat better with less walking (I walked around three miles a night at the facility) and less potential for heavy lifting.
    Financially, it’s scary. Even though I have insurance, I can’t afford to get the things done that would need to be done to correct the sciatica completely. Living with chronic pain makes me grouchy sometimes.

    • Thank you for sharing Cara. It must be so hard with constant pain for company. That is some mileage you did every evening. Let’s hope things improve for you both financially & physically

  • Due some astute investments over the years and working in the middle east for ten years we are looking forward to ‘slowing down’ in a couple of years once we have the kids through their respective universities

    • Very young retirees then Mike! I do think we need to encourage youngsters to put a little aside way before they retire. Retirement needs planning & should be seen as the start of something rather than the end.

  • Trenna Sue

    I so wish that ranchers really retired. We just work a whole lot slower.

  • travelwithmrst

    My husband and I are both 54 and we’ve had increasing amounts of retirement discussions lately. We think optimistically that 62 is the magic number, but it will probably be 65!

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