One of the toughest financial decisions you might make in your lifetime is figuring out when to retire. And it's a decision you need to put a lot of thought into.
First, you'll need to try to calculate your annual expenses to see what income you need. Then, you'll need to see how much you've saved and figure out how much annual income your nest egg will likely provide.
Image source: Getty Images.
You'll also need to account for surprise expenses, as well as income sources like Social Security. So there's a lot of number-crunching to do all in.
But while it's important to cover all of your bases from a financial standpoint ahead of retirement, there's another key question you need to be asking before bringing your career to a close. And it's a question far too many people risk overlooking.
Make sure you're ready for what lies ahead
Your financial situation might change quite significantly once you enter retirement. But so will your entire routine. And so before you retire, you need to ask yourself a key question: What will I do with my days?
It's a more loaded question than you might imagine.
Studies have shown a link between retirement and negative feelings. And sometimes, negative feelings can spill over into full-blown depression.
That's not what you want after a lifetime of hard work. So before you actually leave your job and upend your life as you know it, ask yourself how you'll fill your days once you're no longer reporting to work.
Maybe your new routine will have you volunteering one day a week, running errands one day a week, tending to a hobby once a week, socializing with friends once a week, and spending your final weekday working on a household or creative project you didn't have time for while you were employed.
Or, your week might look completely different. You may decide you'll look after your 3-year-old granddaughter twice a week so your son can save money on child care. And you may require a rest day in between. The point, however, is to come up with an actual plan for filling your days so you're not left to scramble.
That plan has to be realistic financially, though. If you're retiring with a pretty small nest egg, it may not be reasonable to say you'll go to the theater one day a week and spend two days a week on the golf course.
That's why it's important to come up with a retirement budget before you start making plans. But once you know what your income picture looks like, you can work with it to find ways to make the most of your time.
Don't write off the idea of working
As you go about the process of trying to figure out what retirement will look like, don't assume that part-time work shouldn't be part of your plans. Even if you don't need the money per se, you might benefit from the structure a job provides.
And if you don't want to be too tied down, look at gig work. You may find that it serves as an opportunity to get out of the house and try something different. And even if you're in a good place financially, extra money certainly never hurts.
