What is retirement?

Generally around ages 65 to 70, most people will stop their full-time work. Retirement is not obligatory, but most people are eligible for both government and privately funded retirement funds at age 65. In most countries, a portion of your paycheck has been put into a government sponsored retirement fund (in the United States, the fund is called the Social Security Administration). When you retire, you are eligible to obtain a pension or benefits from this fund. You may have also contributed to a privately-held retirement fund (an Individual Retirement Account or IRA in the United States) or your company-sponsored account (such as a 401K account). Often, due to inflation and other factors, payouts from your retirement funds are not sufficient to sustain your lifestyle as if you were earning a paycheck.

Retirement takes place for many reasons. Some people just want to have more leisure time after a lifetime of working, allowing them to spend time with their families, taking up new activities or developing other skills. Some people are forced to retire because of poor health. Some employers encourage retirement.

What is retirement planning?

To plan for your retirement is to project your budget needs into the future. Your lifestyle changes dramatically at retirement. You will no longer have work obligations and thus you will no longer get a paycheck. However, your expenses will continue—expenses such as housing, food, utilities and entertainment. Retirement planning will help you set up a way to continue living the kind of lifestyle you are accustomed to while no longer receiving a regular paycheck.

A retirement plan is a methodical way to assure yourself that you will have enough income to cover your expenses. Usually, a retirement planning specialist will meet with you to help you decide how to create this plan, and he or she might suggest several different guaranteed future income sources such as annuities.

What is involved in retirement planning?

Retirement planning involves projecting and deciding your needs and goals in your retirement years. Two major areas of retirement planning are:

		Financial planning: Making sure you have enough income to accommodate your expenses.
		Estate planning: Designing a program that will dispose of your assets to your beneficiaries, while easing your tax burden.

 

What are the benefits of retirement planning?

Planning for your retirement helps:

		Prepare for unexpected expenses or events in the future
		Obtain a sense of financial security and well-being
		Increase financial flexibility
		Eliminate hasty decision-making at retirement age