Life can get so busy that it’s a challenge at times to process anything beyond “what’s for dinner?” However, unless you’re content with the thought of scraping by on macaroni and cheese dinners in retirement, you may want to start asking questions about your retirement goals (and how to achieve them).
The following questions can get you thinking about the important issues and prompt discussion with your spouse or family:
1. Do I really want to retire?
Everyone enjoys a vacation from the classroom or school, but many retirees have a hard time adjusting to life without work. Consider your goals and how they might fit into your retired life.
2. How much money will I need to retire?
There’s no magic number when it comes to retirement savings, because it depends on your lifestyle, life expectancy and retirement goals. Inflation will undoubtedly take a bite out of your retirement savings, and rising health care costs may also be a burden. While CalSTRS estimates that it will replace 60% to 65% of pre-retirement income on average, financial experts suggest you may need as much as 100% of pre-retirement income to maintain your standard of living.
3. What is my life expectancy?
What age did your parents or grandparents live to be? If you have similar health characteristics, you may expect to live at least as long as they did. With medical advances, life expectancies are getting longer – which means more years in retirement!
4. At what age do I hope to retire?
According to CalSTRS, the median age of members retiring in 2010-2011 was 61.9 years. However, you may hope to retire as early as 50, or perhaps you think you'd like to work as long as you are physically able. Once you determine when you want to retire and how many years you have to save for retirement, you can develop goals based on this timeline.
5. What kind of lifestyle do I expect to have while retired?
If you love traveling and being active, you may need to plan for a more expensive retirement than someone who enjoys settling in and playing cards. You may have to plan on replacing 90% to 100% of your pre-retirement income. On the other hand, if your home mortgage and other debts are paid off, your health is good and you plan a modest retirement, you may be able to maintain your lifestyle on 70% to 80% of your pre-retirement income.
6. What are my spouse’s retirement goals?
If you have a spouse or partner, discuss what he or she has in mind for the future.
7. Will I work after I retire?
Do you see yourself working in retirement because you miss interacting with students and colleagues? Or do you anticipate a savings shortfall that makes it necessary to keep working? (Note that working part-time after retirement outside the California public school system will not affect your CalSTRS retirement benefit. However, working within the system may. Visit the CalSTRS website for more information about working after retirement).
8. Have I reviewed my retirement plan lately?
An annual review of your defined benefit plan (CalSTRS or CalPERS) and 403(b) or 457 plan account is important in keeping your portfolio on target to reach your goals. You may consider automatic rebalancing features (if available) to help you maintain an investment mix appropriate for your timeline and risk tolerance.
9. Should I boost my retirement savings?
Take advantage of your retirement plan and the benefits of compounding earnings by finding ways to save more. Boosting your 403(b) or 457 contribution amount by just 1% or 2% of your pay can make a difference. For example, if you are currently earn $50,000 and contribute $250 a month (a 6% contribution rate) and you earn an average annual return of 6%, you could accumulate $115,510 in 20 years. If you increase your contribution rate to 8% of pay, or about $333 a month, you could accumulate $153,859 over the same time period if you earn the same rate of return
* Rate of return is for illustration only and is not meant to represent the performance of any particular investment. Your results will vary. Calculations are gross of fees and taxes.