Plans for retirement are based on considering present circumstances and making intelligent assumptions about the future. Since both these things change over time, a retirement plan is more of a guide than a target.
Retirement planning starts with dreaming. You’ve heard the phrase ‘begin with the end in mind.’ By starting with an idea of what retirement would look like, you can be thinking about the financial needs such a plan requires.
The younger you are, the more likely your plan will change over your lifetime. The closer you are to retirement the more locked in your plans become. But in either case things could happen.
Asking ‘what if’ questions about your plans can help you build backup plans. For example, if you plan on a return of 8% for your investments, ask ‘What if the market tanks and you only get a 6% return?’ or if you plan on selling your house before moving to your dream location, ask ‘What if the real estate market has lost 30% of its value since you made your original plan?’ or ask, ‘What if you are forced into retirement early by a disability?’
Of course, you can ask endless ‘what if’ questions, so just focus on the more likely. Questions like, ‘What if the price of wheat triples?’ are not useful for personal planning (unless your business is wheat).
If selling your home is part of your upcoming retirement, call for an estimate of your costs and profit in today’s market.