A majority of people think of retirement as something which they have a long way to go before they put in consideration. We are instead focused on raising our families or paying for our mortgages for our first homes. The younger you are, the lesser the thought of saving for retirement is appealing. When in your forties, your priorities are the success of your business, and your children’s university tuition payments. After a while, your fifties arrive and with them, the realization that retirement is nearing; this can be scary. You then realize that time is not on your side.
We all fear the thought of retirement for various reasons. Nobody wishes to imagine how old age feels. On top of that, putting away money you could be using to settle immediate bills is discouraging. To alleviate these fears, you will have to understand the process of retirement planning. Only by doing this will you be able to make a solid plan. You will also be able to balance current needs with future investments.
The amount you need to have at retirement is surprisingly similar to your current expenditure. The basic needs do not diminish as you age. Secondary desires also still present at that age. All this is quite costly. You can calculate roughly what is required. You first look at your current income, then assess its ability to sustain your lifestyle. Then adjust where applicable.
Look at the expenses your employer covers for you that will be absent once you retire. They include shelter, vehicles or medical covers. Add up their cost to your monthly income. On top of these, also add the luxury items like travel. Do not forget to include emergent expenses like car repairs.
The next step is subtraction of expenses that will disappear at retirement. Examples are work transport costs. Eliminate work-related outfit costs. Recurrent professional development and work-related club membership fees will also disappear. Remove also the total you pay for loans that will have cleared by then. Your mortgage fits this description.
Your children will logically not be depending on your, so you can also remove that expenditure. Consider also the amount your spouse is outing towards the same exercise. The both of you could manage your lives together, making it easier on you. Should you also be expecting some inheritance, factor that in too.
The end figure is the focus on your savings calculations. An important tool to implement at this point is a profit sharing calculator. It is a computer program that assists you in doing those calculations. It includes tax deferral for retirement costs or earnings, and your employer’s current contribution. It is to your advantage to retiring as late as possible, as you will get more money. After it makes its calculations, it will give you a solid retirement savings plan.
Your retirement savings plan should be sufficient and well protected. Getting old may be a scary prospect. Getting old while poor is far much worse.