Five Questions Every Worker Should Ask Before Retirement

Wall Streets recent turmoil has many investors questioning whether they will have enough to retire the way theyve always dreamed, or to retire at all, for that matter.

Whether your post-work life is just around the corner or far away in the distance, there's never a bad time to reevaluate your definition of retirement: what it means ideologically and financially.

How you answer that question has very important implications about where you're going to be and what you're going to spend, says author and certified financial planner Eleanor Blayney. There's so many demands on the dollars we thought we'd be using in our 60s or 70s. Retirement used to be a going away from the workplace. Now it has to be thought of as 'what am I going toward?'

When it comes to retirement planning, it is important to evaluate the big picture: desired lifestyle, trips and activities to pursue and of course, financial security and retirement.

You have to be much more active in [retirement], you're also at the point of life where you're at the maximum complexity of financial issues, Blayney says.

Deciding how much resources retirees will need and when to pull them, is tricky and people generally do a poor job of it, according to experts. Research from the Society of Actuaries shows that that 49% of retirees and near-retirees plan for 10 years or less of retirement.

A certified financial planner or money manager can help investors understand complicated tax, estate and retirement demands, but before going its important to have a plan.

Here are five questions every investor needs to ask regarding planning for retirement:

How am I going to spend my time and how will I make it count? It's important to visualize your day-to-day retirement life in order to properly plan for it, Blayney advises.

Where will I be and who will I be with? she says. Boredom can cost you. You pick up expensive hobbies. Sometimes our only job is how to spend our money and how to make it last.

Practicing retirement is a good start. Before leaving the workforce entirely, Blayney suggests knocking your work schedule down gradually and observe how you spend your money and extra free time. Take the time to try out new hobbies and pursue passions.

Do I have enough to have live comfortably and have fun? Review your retirement goals regularly. Social Security can be drawn without penalty between ages 65 and 67, depending on birth year. But Social Security can not fully fund you retirement and will require some sort of supplement either through Individual Retirement Accounts (IRAs), which can be withdrawn at age 55, pensions or 401(k) plans.

The age at which each person can retire varies; the longer you work, the more you'll  benefit from your investments and Social Security, says Anna Rappaport, an actuary and retirement expert. Researchers at Boston College have estimated that many people have a shortfall in what they need for retirement but working two to four years longer will close the gap for a lot of them.

Be sure to evaluate your income and budget for necessities, incidentals and fun money.

Many retirees and financial advisors assume the cost of living decreases in retirement, pointing to costs to commute, meals and wardrobe, says Mark Gianno, president of Gianno & Freda, Inc., a Boston accounting firm. Retirees spend at least as much and often more than they did while in the workforce. Retirees have more time on their hands to pursue interests such as travel, home improvement, entertainment and hobbies.

Should I downsize? Housing accounts for about one-third of expenses for people aged 65 and older, according to the Mature Market Institute. Next on the list is transportation, taking up nearly 20% of total expenses. A lot of retirees want to keep their big place for a family to come home to for the holidays, but Blayney says moving to a smaller home in a more affordable city is a good way to stretch your nest egg.

Take a look at AARP's 2011 list of most affordable retirement cities

If downsizing isn't an option, or you'd like to stay in your home forever, pay off your mortgage before retirement or consider a reverse mortgage as a way to gain extra monthly income.

Also consider downsizing big, gas-guzzling vehicles or opt to keep cars longer to avoid recurring payments.

What if something happens to me or my spouse? Consider how unfortunate circumstances could affect your lifestyle and plan for them while you're healthy: Will you want to be near your children in the event that you get sick? Live in an assisted-living facility? Will you have enough money to take care of yourself?

Plan adequately for widowhood, Rappaport says.

I estimate that an individual needs about 75% as much to live as a couple, she says. Most people think the survivor will be about as well off as before the death of his or her spouse, yet many widows have a decline in economic status after the death of their spouses.  About 4 in 10 older women alone have virtually no money other than Social Security.

What about health care? Medicare is available to most people 65 and older, but even with government or employer-subsidized insurance, unreimbursed health-care costs associated with aging could cost as much as $200,000 over the course of retirement, according to Blayney.

Nursing homes alone can exceed $70,000 annually, Rappaport says.

Medicare covers a very large portion of acute health-care costs for those over age 65, but very little long term care expenses. And individual insurance premiums go up with age, and insurability may be lost if the purchase is delayed. Prepare for medical expenses and coverage in advance to prevent financial ruin, Rappaport says.

Gianno suggests transferring assets away from your control long before they may be forcibly spent for your care.