Four Money Questions to Answer Before Retirement

4. If there is a shortfall, how can you can you make that up?

As you can see, this is pretty straight-forward. It's not complicated at all. It's a matter of comparing your resources (passive income from pensions and Social Security and portfolio income from investments and real estate) to your use of resources (average cost of living, accounting for inflation). If there is a shortfall, you have to do something about it. You can either:

Spend less

Earn more

Work part-time

Some combination of the three.

Once you go through this exercise, you'll know if you have enough money to retire or not. If you don't have enough money and you really want to retire, you must find a way to either work the fourth step until you can make the math work.

That may mean downsizing your house, moving to a less expensive area or working part-time. If you are dying to retire but there is no way you can afford it, I have bad news. You can't retire.

It might be time to consider changing your career to make more money. Or it could mean that you have to go back to sharpen your pencil to find more cuts. The one thing you do not want to do is to ignore the reality of your situation and retire because you want to, but then learn the hard way that it was a mistake.

If you don't have the money, please don't even think about retiring. You'll be very sorry eventually. And most likely it will be too late by the time you realize it.

But for our discussion, let's assume that you do have enough money to retire. The question remains. Is it time for you to retire now?

To answer this, you have to ask yourself what you would do with your time. If you can afford to it and you prefer to spend your time doing something else, you should retire immediately. Life is way too short to waste it doing something you don't enjoy - especially if you have the resources to do follow another path.

But if you love what you do, why would you consider retiring just because you can afford to do so? To me it makes no sense. That's why I have no plans to retire - ever. I just love what I do. I can't imagine doing anything else with my time than what I currently do.

One of my favorite 90-year-olds is a certified public accountant, who owns a great deal of real estate in Los Angeles and has a very healthy portfolio, as well. He isn't lacking anything.

When I want to speak with him, I call his office because that's where he is - at work. He is there because he wants to be.

It might be smart for some people to scale back and work less once they have enough money. But to retire completely just because you can isn't appealing to many people.

I have been working with retirees for over 29 years. I've seen plenty of people who retire and travel, volunteer and basically party. They are loving life because they a) had the money to retire and b) knew they wanted to do something else.

The people who retire successfully meet these two criteria. The people who are miserable in retirement are those who either don't have enough money to last over the long haul or don't have an alternative use of their time that excites them.

If you are retired, how did you know it was the right time to do so? In retrospect, did you retire at the right time? What would you do differently?

If you haven't already done so, when will you know when it is time to retire?

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--By Neal Frankle, CFP, founder of Wealth Resources Group in Agoura Hill, Calif., for AdviceIQ

Follow Frankle's blog at Wealth Pilgrim

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