Retirement planning

When I logged into my 401(k) account last week, the retirement forecast tool showed that I am on track to receive $175,000 per year (in today's dollars) during retirement. Of course, this assumes that I continue my current contribution rate until age 65, and remain invested in aggressive (stock) funds.

While motivational, I believe that figure is overly optimistic in my case for several reasons. First of all, I don't want to work--at least for monetary compensation--until I'm 65 . I am hoping to be done with my current career by my 50s, if not my 40s (whenever my net worth will be around $2 million, in today's dollars). I will probably continue working after that, but it will be more for personal fulfillment and health insurance, so I expect my income to drop significantly.

Secondly, I plan to slowly shift my assets into safer investments as I get closer to retirement age. I anticipate that this will have an adverse affect on my rate of return, but it should also shield me from market risk. A lot of baby boomers made the mistake of staying in the market as it dropped over the past few years, and have suffered huge losses in their retirement portfolios as a result. Some retirees have had to come out of retirement in order to survive the economic downturn. I don't want to have to face that possibility.

Finally, I don't think I will require a substantial income to sustain my lifestyle upon retirement, because my wants and needs are rather modest (financially speaking). My top priorities in life are maintaining my health, spending quality time with family and friends, and learning from & teaching others. I don't expect that to change after I retire. With my projected savings, I should have enough investment income by then to do some traveling, pick up a few inexpensive hobbies, and maintain a comfortable living standard.

Anyway that's my plan, and has been for a long time. Could things change? It's definitely a possibility. After all, I'm still decades away from retirement age and if I've learned anything, it's that life can be unpredictable. I guess I'm glad that I'm thinking about this stuff now, and can still change course should I need to. Unfortunately most people don't think that far ahead; they were too busy enjoying the good times during the boom, and are preoccupied with making ends meet during the economic downturn. However, retirement planning is too important to play it by ear, and no one else--not the government, or your financial advisor--is going to be impacted as much as you if you don't make it a priority.