Even if you’re a long way from retirement, you might be wondering how retirement planning can help you achieve your financial goals. For a secure, enjoyable retirement life, you should start your retirement planning as early as possible and using a retirement planning calculator is a great way to start.
How and when should I use a retirement planning calculator?
Ideally, you should start retirement planning in your early twenties or when you are out of college and have started your working life. The short answer to this question is; start planning for your retirement as soon as you can. As soon as you earn your first paycheck, begin saving toward retirement. It is simple; the earlier you start saving, the more time you have to save which gives you more opportunity for your money to grow. Better still, if this year’s earnings will generate a few more dollars over the years your savings swell more and more.
How much money will you need to retire?
This is probably the biggest question for those approaching retirement. How much do I need for a comfortable retirement life?
Many factors including current and desired lifestyle will play into how much you will need to retire comfortably; you can find many retirement planning calculators online to help you get started. Some of the factors that affect how much you’ll need are:
Time of retirement
The earlier you retire the more money you’ll need for retirement life. Let’s say you started working at 20 and expect to retire at age 60. Let’s also assume that you’ll live to be 90 years of age. This means that you have 40 working years in which to save for a 30-year retirement period.
Your retirement needs
We all have different needs and this will continue even into retirement. For example, if you have a child at the age of 40, by 60 when you wish to retire your child will only be 20 years old. You need to plan for his/her schooling, health care expenses, and other needs. You may also be anticipating your daughter’s wedding after you retire. If you expect to contribute significantly toward the wedding you may want to plan with that in mind. Most importantly, you will want to decide what kind of lifestyle you want including travel, recreation, and home expenses.
Impact of investment returns, inflation, and taxation
These three factors will have a significant impact on how much you need to save. For example, if your investments can generate considerable returns then you’ll need to save less. However, it’s natural for people to become conservative with their investments as they near retirement because they are drawing on the investment for income and do not wish to risk a big dip in the market. Investing conservatively means lower risk exposure but also lower return potential so often more money is needed in the long term.
Inflation is a global problem. The rising cost of housing, food, and heating, etc. is a factor you MUST consider during retirement planning.
How much you will need is also determined by whether or not you are married. Normally, a married person who earns $80,000 a year will end up with less money after tax compared to a couple that earns a combined $80,000 or $40,000 each. A married couple may also need to save more because they are likely to have more expenses.
Involve retirement planners and use retirement planning calculators
You should consider working with a retirement planning company for the period leading into and during your retirement life. Professional retirement planners possess the knowledge and skills to help you pursue the path to an enjoyable retirement life with a plan suited to your needs.
You may also wish to use an online or offline retirement planning calculator which can help you determine what you need to save and identify your strong and weak areas which can help you reach your financial goals.
Contact a certified Retirement Planner at MultiGen Wealth Services today to get started!