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Are you ready to retire?

By Barbara Whelehan ·
Friday, February 17, 2012
Posted: 6 pm ET

Psychologically and emotionally, you may be ready for retirement. What about financially?

As part of its suite of retirement planning tools, T. Rowe Price this week released a new interactive tool to help those nearing retirement envision their future and face the facts. You don't have to be an investor in their funds to try it, and you don't have to commit to moving your assets there, though that would be ideal from the firm's point of view. But it's worthwhile to spend 15 minutes going through the exercise.

It starts out fun, helping you prioritize your future retirement plans by dragging photos of various activities into one of three bins: very important, moderately important or not at all important -- in which case it goes in a trash can. Do you want to travel in an RV? Spend time in your garden? Travel internationally? You decide from among two dozen fun activities.

Next, you determine where you plan to live in early retirement. In a low maintenance home?  Move to a more affordable area? Warmer climate? Stay put? You get about a dozen choices, and again, you put them in bins according to your priorities.

Then you determine the age at which you plan to retire, and if you have a significant other you'd like to add to the equation, enter the age at which he or she plans to retire.

From there, you go from reverie to reality. Basic needs are listed, along with potential sources of income. You check those income sources you expect will be used to fill your basic needs, and then specify how confident you are about whether your needs can be met. The exercise is repeated, except that your important retirement activities are listed next, along with potential income sources. And again, you indicate the level of confidence you have about whether you can afford those activities.

Then you get hit with the possible risks you face in retirement. These include longevity risk, investment risk, inflation risk, health care risk and public policy risk, such as the risk your taxes may go up. Frankly, this part isn't much fun at all, only because these risks can put a serious crimp in your retirement plans. But the questions you are prompted to answer are intended to get you thinking about whether you are adequately prepared to face them.

If you're looking for a fast answer about your retirement readiness, you won't get it. The tool doesn't ask specifics about your resources, nor does it offer a prognosis for whether your plan will succeed or fail. You do get links to additional resources, and you can print out the summary profile. Doing so enables you to bring up concerns with your significant other. Or, if you feel overwhelmed by the risk forces out there, you can discuss the summary profile with a financial planner.

In any case, using the tool (at gets you thinking about putting contingency plans in place in the event your original plans don't work out quite the way you envision.


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