All right, welcome once again. In our last lesson lesson three, we talked about longevity and how long you can expect to live and need money to pay your bills. Today in Module One, lesson four, we're going to discuss setting a target date for your future retirement. What age do you want to retire? Before we get started a gentle reminder for you to record questions as they appear and then record what you think are your best answers. This is a mental exercise to help you filter the mental inputs that come your way about retirement.
Here in Module One, lesson four the message is to establish a time limit on what you need to do before you look at the calendar and realize your plan is not what you hope for. This is a tough one, just like the longevity questions, but at some point you need to make a guess. The older you are, the more important it is to give yourself a target. Having a target helps you define what steps you have to take before that magic date arrives. For example, do you want to have mortgage payments in retirement? In a perfect world you might want your last payment tomorrow.
Coincide exactly with your retirement date. And there's a way to make this happen. By the way, if you do have a mortgage, there is no real value in my opinion of trying to pay it off before you retire. I'd rather have you focus on growing your retirement accounts, so that they'll have as much money in them as possible when you tap into them to pay your bills. What you want to avoid is arriving at retirement with no clue and simply hope you have enough money. Is any of this written in stone?
No, of course not. You will almost certainly change your mind. Who in your family has already retired? Can you talk with them and get their perspective for what worked for them and what didn't? Are their variables that it looked at today, they would have dealt with differently or avoided. These are not often easy questions to ask a family members, but I encourage you to try whatever the case in our society, retirement as a concept is alive and well.
And at some point, you are going to stop working, at least in the sense that whatever you're doing to earn money prior to retirement stops. definition. This means you do have funds and credits from which you will pay your core expenses. And this is another important concept. What happens to the money you have coming in today. Some of it goes to pay bills.
Some of it gets saved for the future. Some of it goes to pay taxes, and not just income taxes, but property taxes, since that's a key ingredient if you plan to live in a home you own. My guess is that if you're a normal person, you simply do what you can and hope for the best. Some of what you earn today goes towards your core expenses. Some of it goes to Uncle Sam and friends. Some of it goes towards discretionary spending.
And if there's anything left it goes into savings and retirement. If you're tired it is in your future. You need to prioritize it better and at least put as much as possible incrementally into those savings buckets. Core expenses are your everyday bills that are bills that cover where you live, what you eat, deal with transportation clothing, basic insurance premiums. All the things that make up a normal life for most people. Okay, someone in Florida just recently at age 20 won the lottery jackpot and got something like 280 million dollars before taxes, he may never have to worry about core expenses.
But for the rest of us, you can be assured we'll have some. As an aside, it's normal to fantasize about winning the lottery, wondering how our lives might change. But since the chances are so remote, it's not worth spending a lot of time on. But it does intrude on what life will be like when you retire. For example, what are you going to want to do every day to cause you to get up in the morning and have a satisfying day? Remember, the gogo years will probably require more money every month than the slow go years.
At least you hope so. So think about this every day that passes gets you one day closer to your target date for retirement. And if you're no longer working at that point, the money you need to get through those days, weeks, months and years has to come from somewhere. If you don't want retirement to be a royal pain in the rear, you have better plan for it. All right, we agree it may be way off in the future. So let's start with questions that you can focus on now.
Questions like, do I like my job? Or whatever it is you do? Are the rewards you get from your work justify the time and energy you spend to get it. People change jobs all the time. This may be something you need to explore. Try to be objective and ask whether you're on the right track or do you need to get off and try something else?
Are you on this track by accident or by design? And how does that influence the financial variables that will define your life in the future, such as your projected retirement date, I talked in the introduction about a roadmap for your journey toward a successful retirement. And I suggested the outline of that will emerge and become apparent as you move yourself through the modules and lessons that make up the course. Hopefully that is now starting to happen for you. At the end of the day, a successful retirement may not be apparent until you get much closer to it, but having a good idea in our minds so we can check the box yes or no along the way, goes a long way towards defining the retirement as successful. Sometimes health issues get in the way.
I had a client who had a very successful roofing business. But along the way, his body broke down from climbing ladders lifting heavy bundles of roof tiles and days in the hot sun and on an asphalt roof. It simply became too much for him. He was skilled at managing other people, but not so good at managing himself. He realized he had to do something else. So he sold his business and began to reinvent himself.
He also knew his financial reserves were not enough to sustain his wife for the next 40 years. That's right. 40 years. We already talked about longevity. So you know, that's possible, if not probable. In his case, he had to find a new source of revenue because he was smart enough to keep from dipping into what reserves he did have to make ends meet Social Security.
Was still several years down the road. Meanwhile, it was not only his health that was a source of stress, his wife had a high paying job and had family health insurance, which was great. But she hated her job and was anxious to find another. All of this is to say every one of us brings something unique to the table as we sit around and plan our journey. The common thread is to identify what is most important, and a lot of that comes from knowing which questions to ask along the way. So back to the primary question of this lesson.
What age do you want to retire? If you realize now you haven't set aside enough money to fully pay the bills, then you may have to simply keep working, and not retire until long after you want to. Another way to treat this age issue is to decide that whatever reserves you have are going to have to be enough. This may force you to look at your current standard of living, which takes you back to the question of core expenses, food, transportation, housing, utilities, personal care, taxes, etc. It's very difficult for some people to first establish a budget and then stick to it. But being disciplined, and making an effort to quantify what you spend every month for what you consider essentials, will go a long way towards making the transition to retirement possible and positive.
If the money is not there, then you may have to move to a smaller house, drive an older car, not spend money like you do now, if you're okay with that fine. But knowing and understanding this is one of the turns you may have to take. Knowing in advance makes it easier to reconcile the difficult choices you may have to make. On the other hand, you may discover you have more than enough and can retire sooner. 65 became the so called official retirement age in 1935. When the Social Security system came into being 65 was the age written into the system.
It was also the age used to determine when someone became eligible for Medicare. We'll talk much more about that later. To summarize the traditional age for retirement is 65. But it's no longer the default age for everyone. But as we live longer lives, and people more and more realize they don't have the necessary reserves to simply quit working. They don't retire at 65.
Just know that if you don't die first, the day will likely come when you pull the plug and tell everyone you are now retired. Maybe they'll give you a party, but probably not. As you become increasingly aware that your future financial freedom is dependent on you making good decisions today. Paying attention to the rest of the questions becomes an increasingly important part of the puzzle. That is you and your future. In the next lesson, module one, lesson five, we start to deal with health costs and how they can become a thorn in your side and destroy the best laid plans.