How to Ensure You Are On Track for Retirement
Retirement is a monumental point in your life, and it takes a significant amount of planning to reach this point. It marks the beginning of what should be relaxed, carefree years without concerns for getting to work each day or how you will pay your bills. In reality, however, many retirees face financial stress, and they often wonder if they saved enough or retired too soon. The question of how much money you need to retire comfortably is a common one, and a closer look at your current finances will reveal if you are on track to retire at your desired age or if you need to make adjustments to your plan to accomplish your goal.
Determine How Much Money You Need to Retire
Before you can determine how much money you need to retire at a specific age, you need to prepare a budget. Your current budget can be an excellent starting point, but it requires adjustments. On a line by line basis, consider which expenses you will still have, such as food, gas and utilities. Then, consider which will be gone by retirement, such as a mortgage payment, credit card payments and more. If you plan to pay debts off before retirement, include a debt elimination plan as part of your overall retirement plan. After all, you will not be able to retire until those debts are fully eliminated. Ensure that you provide ample room in your budget for healthcare expenses. Many retirees have rising medical expenses as the years progress, so budgeting more for this expense than you currently need is a smart idea.
Review Your Current Account Status
The next step to take to analyze your progress toward retirement is to review your current account status. You may have set up self directed IRA a few years ago that you are contributing to regularly, or perhaps you are saving money in a sharebuilder stock account. There are many ways to save for retirement, and you can make a list of all of your financial assets that are increasing in value and that may provide an income stream for you in retirement. List the account type, the account balance, the current rate of return and the amount of income you are currently receiving from the asset. For example, a stock account may be producing dividends for you. You may be reinvesting these dividends without seeing them, so you may need to review an account statement to determine the income they are throwing off. Consider the difference between the current income you are generating, not counting your salary or regular work income, in comparison to your financial need in retirement. You may also research the amount of Social Security income you can expect to receive using the Social Security Administration’s website.
Use Online Calculators
Between now and when you retire, inflation will impact your financial need or budgetary expenses. In addition, you may continue to make contributions to your accounts. These accounts may also increase in value through their own growth. There are a lot of moving factors that can be difficult for you to properly estimate, so it is wise for you to use online retirement calculators. There are numerous calculators that you can use. Try out a few to determine which one you are most comfortable with. Take time to adjust the numbers used in the calculator to determine how much money you should be investing versus how much money you currently have saved.
It can be stressful to discover that you are not currently saving enough for retirement, and it can be heartbreaking to discover that you do not have funds available in your budget to save the amount needed. If this is the case, consider working a second job, readjusting your assets so that they produce a greater return for you or adjusting your retirement age by a year or two. Keep in mind that some people will even continue to work at a part-time job for a few years or more into their retirement to further stretch their funds. However, avoid retiring too soon. This could put you in financial jeopardy in your very advanced years when you are physically unable to work.
By: Sia Hasan