There are a number of different considerations that go into your retirement planning. One of the most import factors is your target retirement age. After all, without an anticipated date for retirement, it can be a larger challenge to know how much you need to save, what your living expenses will be during retirement, and how to formulate a plan to reach your goals.
More specifically, it’s important to have a target retirement age in mind for the following reasons:
Your Work Plans. Having a target age for retirement can certainly impact how you approach your job or career. As you begin to get closer to your target retirement date, you may make different decisions in regards to how hard you’ll work, the type of projects you’ll work on, and how you’ll approach your co-workers and supervisors.
Furthermore, having a target retirement date could make it easier for you to determine whether, in addition to making contributions to your self-directed IRA, you might also make contributions to an employer-sponsored retirement plans and choose the best available investment types with that target date in mind.
Note that the concept of “retirement” continues to evolve, particularly as it relates to remaining in the workforce. So your target retirement date might simply be the date on which you complete a transition from full-time employment to part-time or consulting work.
Your Investing Strategy. Having a target retirement age can also help you stay on track when it comes to the investing strategy you have for your self-directed IRA. The further away you are from your target retirement date, the more flexibility you’re likely to have when it comes to your investment decisions.
Your Social Security Benefits. While you may believe this to be a bit of a moving target, and you might feel like there’s enough uncertainty in the U.S. Social Security Retirement Benefits program moving forward that it can be difficult to make plans around. But you should still take your anticipated Social Security retirement benefits into account when you’re doing your retirement planning, and the only way to get an accurate estimate of your scheduled benefits is to know how old you’ll be upon retirement.
Liquidity of Investments. With a self-directed IRA, you’ll have the ability to move beyond the basic stock and mutual fund investment categories and invest in illiquid asset classes such as real estate. Having a target retirement date in mind will allow you to create a plan for the liquidation and disposition of those assets.
Remember that it’s worth periodically reevaluating your target retirement age. Your circumstances will change over time, and you made decide that you need to move up or push back your target retirement date in response.