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I had a lot of fun yesterday being on the panel for the #retireeNextDoor Tweetcast.
Jeff Rose from Good Financial Cents and Money Tips did a fantastic job hosting it and some wonderful advice was shared.
Like I mentioned the other week, we tend to put off preparing for retirement for a few reasons. I think one huge factor is the unknown.
We hear all these huge numbers about what we need that it can be discouraging. I don't think we have to be afraid of it.
Planning for retirement is a bit like saving up for a baby – you will never be able to prepare for every event, but you're better off having something saved up rather than nothing.
You can get an idea of where to start if the two of you can sit down and find what works for you.
Define Your Retirement
Make it a dinner date and talk about what you'd like to do when you're retired. Ignore the numbers for just a moment and just focus on what you want.
Retirement is a kind of a catch-all phrase that doesn't really help you plan as everyone has different ideas on how they'd spend it.
Joe Saul-Sehy from Stacking Benjamins had a wonderful remark about retirement yesterday. He said retirement isn't an event, it's a 40+ year span of life for many.
It may be easier to think of it in phases. What do you want to do when you're in your 30s, 40s, 50s, 60s, and beyond?
After talking about it, you two may want to do a hybrid or stepping stone retirement. Perhaps you set a goal to build an income stream that will allow one or both of you to explore a new business or to start investing in real estate.
You're not officially retiring, but rather you're now able to quit your day job and give full-time attention to building the income stream and boosting net worth for when you do stop working for money.
Every couple will come up with their own plan, but you can make progress until it's discussed.
Finding Your Retirement Number
Now that you have a picture of what you want, the two of you can work backward and see how much money you need to retire.
You may discover that your retirement doesn't have to require a million dollars in the bank to achieve. Or you may see that it will take a boatload of money.
If you're in the latter category and you are freaking out about not having enough when it's time, take a few days and break your goals down further to extract the absolute essentials.
What do you truly want? What are the non-negotiable? Start with those and get a baseline number and build from there.
No matter what your goal is, the best thing you can do as a couple is to start now. If you haven't already, start this week.
Pick some amount you can afford, automate your contributions, and increase it with every raise/bump in pay. Time is one of your biggest allies, so use it.
Should You Include Social Security?
Personally, we don't include Social Security in our retirement plans. I have no idea how exactly it play out, but I'm pretty sure that it will be stripped down by the time we qualify to take it.
I'd rather be pleasantly surprised at the extra income than being disappointed because it wasn't what I had planned for.
Unless you will be retiring soon, I think you're better off not making it a pillar of your retirement plan. (Completely my personal opinion)
Thoughts on Retirement and What It Means to You
I hope the two of you have a chance this week to discuss your retirement plan. I'd love to hear what you come up with and what your overall strategy is to get there.