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We all seem to have good timing skills; we use them doing simple things like crossing the street, or cooking a big dinner, or showing up at work on time – unless the dog eats the alarm! And, we all work hard in hopes that we can someday retire. But when? What’s the timing of that?

Maybe “when” is not the first question. Maybe the timing of retirement is more dependent on the answers to the question “how”. How will you afford retirement?

Let’s start easy

Do you have enough retirement income to cover your anticipated expenses? Understanding the expense question may be harder than it looks. Simple living expenses are easy to nail down, but what about healthcare?

If you retire before age 65, you’re not eligible for Medicare and will need to factor in the cost of healthcare in the interim. Since some expenses might go away in retirement, like mortgages, are you allowing for fun activities like travel? And the big one – how long do you expect to live? If you live to be 120, you’ll be spending a lot more in retirement! Finally, if inflation is 3% per year, your expenses will double in roughly 23 years. You get the idea – the expense side requires some careful thought.

How about your income in retirement? The old rule of thumb says that you can initially take 4% of your savings each year. Considering the recent stock market movements, 4% might be a little high, but let’s use it as an estimate and do the math. If you need $50,000 initially from your savings the first few years (4% of your savings), you will need to save $1,250,000.

Consider other income and taxes

You can also supplement your retirement income with Social Security. The longer you wait to take those benefits, however, the better they are – by far! Add your Social Security to your savings withdrawal, plus any pensions or other income and that brings you to your gross income. Then, you have to back out income taxes to arrive at the money needed to pay your retirement expenses.

Account for the unexpected

Now that we have a good starting point, let’s make it more realistic. Investment returns are not the same every year, darn it. If in the early years of retirement the returns are low, it will affect your ability to withdraw without affecting the overall plan. There could also be unexpected health care issues that cause some out-of-pocket expenses. You get it; there are lots of variables that could affect the best laid plan. If you create a range of income and expenses, it might allow for navigating through some unexpected storms.

Plan for the post-work environment

So now we have a range and the numbers look about right. Time to retire? Almost – but one more thing: we need to think about life in retirement and what that looks and feels like. For all the planning we’ve done to get us to this point, we often neglect to plan for not working. After the initial honeymoon of retirement wears off, then what? A purpose in life is so important to our mental and physical health. Developing a plan for what we will actually do in retirement is as important as the financial plan to support it.

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