5 retirement questions to ask before 'How much should I save?'

(BPT) - How do I plan for a comfortable retirement? This question is top of mind for many Americans. Yet how to afford that dream retirement remains a mystery to most. According to The Employee Benefit Research Institute’s 2019 Retirement Confidence Survey, only 42% of working-age people have tried to calculate just how much they need to save to live comfortably in retirement.

But “how much money you need to retire” is not the only question you should be asking — and not even the initial one. There are a few key questions you should consider first to help determine what “retirement” means to you, which will help paint a clearer picture of that magic savings number. Before you pull out your calculator, consider these questions:

  1. Have you considered a “second act” career in retirement? According to a recent Charles Schwab survey, more than 40% of people within five years of retirement said they want to continue working in retirement. Whether you’re scaling back hours at your current job, planning to embark on a new career, or pursuing a passion project, this has some palpable advantages when it comes to retirement planning. Along with the benefits of staying active, by continuing to earn a paycheck, you mitigate the need to deplete existing savings.
  2. Would you rather take “mini-retirements” and postpone long-term retirement? While most people still envision retirement as a point later in life when they stop working altogether, the idea of taking time off from work for extended periods — to travel, raise a family or simply take a break — at various life milestones is becoming more common. If this sounds appealing, it will require some diligent planning and saving along the way and will impact the way you think about saving for a traditional retirement down the road.
  3. How important is it to leave a financial legacy? Ask yourself, would you rather spend every penny or leave money to family, friends or a charity after you’re gone? This answer will impact your financial decisions in retirement. Estate planning isn’t just for the ultra-wealthy — most people should create a basic estate plan, including a will that outlines how you would like your assets to be distributed.
  4. Do you and your spouse or partner have the same retirement lifestyle vision? If you are in a relationship, it’s a good idea to get on the same page when it comes to retirement. Do you want to be active? Are you planning to stay in your current home or retire elsewhere? These questions will not only help determine how much you need to save, but also can inform whether you will merge your finances or keep some separate to meet differing goals.
  5. Do you have a plan for funding your retirement once you decide to tap your savings? You’ve spent most of your life saving, so before flipping the switch, make sure you have a plan in place for how to make those savings last. To do this, consider consulting a professional to create a retirement income plan and start with the basics:

    • Choose the right mix of conservative and aggressive investments to provide diversified sources of return.
    • Determine how much you need to withdraw on an annual or monthly basis.
    • Learn about products and services designed to help manage and deliver retirement income.

For help thinking through these questions, you can visit a Charles Schwab branch. Schwab has also created a card game called “The Next Chapter” with more retirement questions to explore.

Disclosures

Investing involves risk, including loss of principal. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

The information provided is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends that you consult with a qualified tax advisor, CPA, financial planner or investment manager.

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