Hobbies. Traveling. Sleeping in. Spending more time with loved ones. These are probably the things that pop into your mind when you think about your plans for retirement. Unfortunately, there is a less pleasant aspect of retirement planning that many people tend to overlook: finances. While retirement will certainly provide more time for you to do the things you enjoy, in many cases it will yield less income than what you’ve become used to in your working years. And although money can’t buy happiness, it can certainly help to ensure your golden years will be more comfortable and enjoyable. Here are some things to consider in making a financial plan for retirement:

How much savings will you have accrued by the time you want to retire?

Take an inventory of all of your savings. That includes personal savings accounts, CDs, Treasury securities, stocks and bonds, employer pension plans, employer 401k plans, IRAs, money market accounts and fixed annuities. If you haven’t saved for retirement, you’re not alone. Nearly a quarter (21%) of Americans have nothing at all saved for retirement, according to Northwestern Mutual’s 2018 Planning & Progress Study, and about a third of workers have less than $5,000 in their retirement funds. But even if you only have a few years left before retirement, you’d be surprised at how savings can add up in a short time. Check out “Why It’s Never Too Late to Start Saving for Retirement” for some ideas from an expert.

What will your overall debt be when you retire?

That includes mortgages, car loans, personal loans and credit card debt. The best way to figure out your total debt is to get a copy of your credit report. You can get a free copy at AnnualCreditReport.com. Once you have the report, make a list of all the active accounts on the report and call those creditors or sign in to your online accounts to find out your current balance. There may also be some accounts that haven’t been reported to the credit reporting agencies. You can look back at old billing statements or check your bank statements to see what payments you’ve made in order to help you remember. Add all of the balances up to determine your total debt. Be realistic about how much of that debt you will be able to pay off by the time you retire. The rest will remain as part of your expenses during retirement.

What will your net worth be when you retire?                                                           

Your net worth includes financial and non-financial assets, minus any debt.

What will your retirement income be when you are ready to retire?

Your retirement income will include Social Security benefits as well as benefits from annuities, retirement or profit-sharing plans, insurance contracts, and IRAs. Some of it will be fully or partially taxable. For information on what retirement income is taxable, visit https://www.irs.gov/help/ita/retirement-pensions-iras-social-security

How much monthly income will you need when you retire?

Consider mortgages, rent, personal loan payments, credit card payments, food, utilities, car payments, car insurance, real estate taxes, supplemental medical insurance, medications, doctor’s bills, homeowners insurance, cell phone, memberships, and entertainment. Once you add all of your monthly expenses up, compare that to what you can expect your monthly retirement income to be. An excellent Investopedia article “Will Your Retirement Income Be Enough?” can help you make that determination.

senior couple hikingWill there be new expenses that come with retirement? Will there be new savings that come with retirement?

Sure, you’ll save money by not going to work every day, including transportation costs and work clothing, as well as contributions to your retirement plan, however, there will probably be new expenses too. Your utility bills will most likely go up because you’ll be using more electricity, gas, and water since you won’t be away from the house for eight hours or more a day. And you’ll have more time to spend the money you have saved for travel and entertainment. Your healthcare costs will probably go up as well.

Will you have a cushion for emergencies that arise?

You will also need to work into your financial plan some monetary padding for any emergencies that arise. As you grow older, you may develop health issues that involve doctor’s visits, medication and even hospital stays. And then there are always other unexpected expenses that arise from sudden problems with your car or major systems in your home such as air conditioning/heat, electrical or roof, etc. Many financial experts agree that an emergency fund should hold between three and eight months of expenses.

Get professional financial advice

If you are overwhelmed by the thought of financial planning for retirement, or even if you feel pretty confident but still would like some reassurance that you are prepared, it can be very helpful to consult with a reputable financial advisor who specializes in retirement planning. Ask some of your friends if they can recommend someone whom you can trust. You can also look for a good retirement planner through the National Association of Personal Financial Advisors and the American Institute of CPAs.

The bottom line is that you won’t really be able to make the most of your new-found free time in retirement if you are saddled with financial worries and unable to afford many of the things you had hoped to do. With careful and well-thought-out planning, you can ensure that you are financially prepared for your years beyond the working world.