That's right, the heroine of our tale is none other than Kerri Strug, who retired from her successful career as an Olympic gymnast to do what many 18 year old retirees would do: go to college and pledge a sorority. The average woman in the workforce will not have the luxury of choosing when she retires based on her personal and physical needs, and it's not because she can't complete a vault. Creating a financial plan for retirement can help you gain some control over when and how you will retire. Though it may be too late to pledge that sorority, having enough retirement savings may help you fulfill your own post-employment dreams. Here are a few questions you can ask yourself to see if you're ready for retirement. For more information, visit WISER's website and check out our "Retirement Income Checklist."
1. Have you considered what annual income you will need in retirement?
Is it 75 percent of what you earn now? It could be more or less than that, depending on your basic needs. Remember that Social Security usually only covers about 40 percent of an average earner’s pre-retirement income.
2. Have you considered how long you might live in retirement?
Many people do not realize that retirement can last 20 to 30 years. It is important when planning to assume that you will have a long life in retirement. And the longer you live, the more likely inflation will erode the value of your savings.
3. Have you considered the cost of Medicare premiums?
They are automatically deducted from your Social Security check. For 2008, the Medicare premium is $96.40 a month. Also, consider the cost of health insurance outside of Medicare. You may think about purchasing a "Medigap" policy in order to cover healthcare costs that are not included in Medicare coverage.
4. Have you thought about how you will handle your savings once you retire?
Remember, if you have saved through a 401(k) type plan, you will be responsible for managing your own money, or hiring someone to help you do it.
5. Do you know how taxes will affect your retirement income?
If you receive money from a tax-deferred savings plan such as a 401(k), you will need to pay taxes on the amounts you receive. You also may have to pay taxes on your Social Security benefits.