When you finally say, “Honey, I think it’s time I retire,” somewhere early in the discussion that follows will be the question, “Do we have enough?” Which is a tough question to answer. Because spending money is a key variable, and it’s terrifying when there’s no longer a paycheck coming in, which is why it makes sense to kick the tires, to perhaps work part-time for a bit, keeping your hand in the mix and not burning any bridges.

For example, if you’re considering a move after retirement, Your Survival Guy has been a big proponent of renting in your eventual destination to make sure you like living  there before plunking down a fortune only to later realize “that’s not for me.” But knowing that you’re ready to fully retire oftentimes answers itself for you. You just know. You’re ready to commit to Your Retirement Life.

Once you’re committed to retirement, you want to have a master class understanding of your spend rate. This is key. I don’t want you using market expectations to back into answering “Do we have enough?” You don’t want to rely on thinking
“If the market does ‘x’” we’ll be just fine.”

A good place to begin your study is understanding Dick Young’s North Star or the risk-free rate of return on T-bills. This gives you a lay of the land.

Your Survival Guy has worked with hundreds of clients, many of whom are living the Retirement Life of their dreams, and many who are about to. Understanding one’s risk tolerance beforehand rather than after the fact is about risk tolerance. When I’m asked what to do in a market downturn, I think of the wisdom expressed by Jack Bogle: “Don’t just do something, stand there.” Easier said than done if you don’t have a plan.

Action Line: Take the time to understand your risk tolerance before you leave the dock. It can get stormy out there. And when you’re ready to talk, email me at ejsmith@yoursurvivalguy.com.

Read the entire series here.

Originally posted on Your Survival Guy.