- Define your lifestyle. Will you continue to work and live your current lifestyle? Or do you dream of traveling the world?
- Choose your target retirement date.At what age will you retire? Do you want early retirement?
- Assess the financial risks of retirement. Before you can put a realistic retirement plan in place, understand the five financial risks that can impact your retirement:
- A longer lifespan requires savings to last longer
- Inflation’s effect on the future purchasing power of today’s dollars
- An overly conservative asset allocation that may put you at risk for not being able to outpace inflation
- A withdrawal rate that depletes assets too quickly
- Rising health care expenses
Consider which risks you may be most susceptible to.
- Determine potential gaps in your savings strategy by estimating your income and expenses according to the number of years you expect to live off your savings. Fidelity estimates that retirees will need 80 to 100 percent of their pre-retirement income to live comfortably.
- Catch up on savings by investing the maximum into your 401(k)
before leaving the workplace.
Fidelity says that with the 2001 Economic Growth and Tax Relief and Reconciliation Act, eligible workers age 50+ can contribute an additional $4,000 to their workplace retirement plan in 2005 above the $14,000 annual limit, if their plan allows.
IRAs let you catch up by contributing an additional $500 in your 401(k)in 2005.