How Prepared Are You for Retirement?  

By Beatrice Calvin

In a survey taken by TIAA-CREF, 64% of workers reported that it is hard to know what sources for advice and guidance they can turn to and who can be trusted when it comes to financial advice. More employers are realizing that they need to provide reliable, trust-worthy resources for employees. Employers understand that in order for employees to have confidence in their ability to retire, employees may need their help.

Recently, my employer organized several half-day workshops designed to assist employees to do just that—prepare for retirement. Presenters included representatives from the company that manages our retirement funds and the Social Security administration. There was a lot of useful information shared. In a way, it was kind of scary to think that retirement is so close. But it also made me realize that I have work to do. Here is some general information that was shared with our group.

To start preparing for retirement, you should assess where you are financially right now. You can begin by defining your personal goals. The you’ll want to consider your benefits & sources of income including savings, pensions and retirement funds, investments, social security, your spouse or partner’s assets, and any other sources.  You may consider working longer. The amount of money you can receive from Social Security and other retirement sources may vary depending on the age you decide to retire. Keep in mind that the longer you work, the more you earn, and generally you can contribute more to your retirement funds.

As you consider your sources of income, you should also make a budget for retirement. Having enough money for retirement begins with having a plan. You’ll need to consider what basic expenses need to be covered. You’ll find that while some expenses may increase once you enter retirement, others will decrease. You should identify your essential living expenses. Major items to consider are listed below.

Home & Related Costs

The cost of shelter could either increase or decrease during retirement depending on your choice of housing. According to the Bureau of Labor Statistics, housing costs may be 1/3 of your entire household budget in retirement. Will you remain in your current home? If so, will you have money saved for home repair expenses (i.e. broken furnace, over-flowing sink, etc.)? Will your mortgage be paid in full when you retire? Based on a 2016 survey conducted by the Society of Actuaries, more than 50% of pre-retirees owe money on a mortgage and 28% do not know when they expect to pay it off. Will you sell your home and move to a senior community? Will you move in with children or other relatives? If so, will they expect you to help with monthly bills (electricity, gas, water, etc.)?  You may need to rethink your living arrangements. You may want to consider moving to a more affordable place that allows you to maintain your lifestyle while still reducing expenses such as home upkeep, utilities, property taxes, etc.

Health Care Expenses

In a survey conducted by Gallup on financial concerns, 53% of respondents indicated that they were worried they would not be able to pay medical costs in the event of a serious illness or accident. This concern may very well be justified. According to a 2015 Center for Disease Control (CDC) report, health care expenses can nearly triple from the time an individual is just over thirty years of age to the time he reaches retirement age.  Will you be prepared for the possible increase in health care costs? Also, keep in mind that as you age, your cognitive abilities may diminish. Will you be able to make sound decisions? What if you have a serious illness or accident? Will you be able to pay your medical bills? Will you have to forego medical treatments because of a lack of ability to pay?

Food & Clothing

Usually, if you are in full retirement, food and clothing expenses should decrease. This is because you will no longer need the professional attire required when working outside of the home. Also, you probably won’t be eating out as much (i.e. going to lunch with colleagues, happy hours after work, etc.) as you would if you were going to work every day.


Here is another area where expenses should decrease in retirement. You won’t have to pay for a monthly train ticket or spend hundreds in gas and parking expenses as when driving to work.

Debt Payments

Forty percent of Americans indicated that they were worried they would not have enough money to pay off their debt before retiring. Given today’s life-expectancy, 46% of Americans are afraid of running out of money. During our workshop, we were given this rule of thumb: you will probably require about 80% of your current income for retirement.

Quality of Life

Once you establish the amount of money you’ll have for retirement, you should think about the lifestyle you want to live during this time. What’s the quality of life you desire?  To determine what you can afford, you’ll want to look at discretionary expenses. Will you have enough money to maintain the standard of living that you currently enjoy? Do you want a vacation home? Do you want to travel the world? Do you want to spend time with family and friends? Do you want to be able to do volunteer work in a hospital, your local library, or in a third-world country?  Do you want to have money left when you pass away to leave a legacy for children, grandchildren, charities, etc. Your ability to do these types of activities may depend on your discretionary funds (the money you have left after you pay for required necessities).

Final Thoughts

These are just a few of the things you should consider as you plan for retirement. Things could look quite grim if you aren’t ready.  It seems that preparation is essential. Start now, no matter how young or old you are. Seek financial advice from qualified, professional sources.