How to Retire Well
For most of us, retirement is not an emergency as it appears to be far off. We are instead focused on raising our families or paying for our mortgages for our first homes. There is even less of a rush when you are still very young. In your fifties, you are preoccupied with running your business or the kids college expenses. 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 have our reasons for wishing away retirement. Nobody wishes to imagine how old age feels. Your current financial responsibilities also make thinking of the future stressing. To help you manage these thoughts, you need to get a clear picture on what it means to save for retirement. Only by doing this will you be able to make a solid plan. You will, also, be able to meet fulfill current and future needs.
The expenses you will incur in future are more or less the expense you are currently facing. The needs of food, shelter, clothing, to name a few, are similar at any age. People in retirement also take holidays, require personal transportation and occasionally go out to eat. These expenses are high. It is not that hard adding up all those expenses. The first agenda would be to assess your monthly income, then compare it with your lifestyle. Then adjust where applicable.
Look at the expenses your employer covers for you that will be absent once you retire. Examples are house, car and medical allowance. Include them to your monthly earnings. On top of these, also add the luxury items like travel. Regular costs such as house and car repairs go in next.
The next step is subtraction of expenses that will disappear at retirement. Typical costs are transported to and from work. What you spend on work clothes can also be subtracted. 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. Typically, mortgage installments come to mind.
Seeing as your children should be independent by then, take away their monthly maintenance costs. 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. Imminent inheritances should be considered too.
What you get at the end will guide you on where to start saving. You can use a profit sharing calculator here. It is an app that simplifies your savings calculations. It factors in the benefit of tax deferral on any retirement related expenses or income and the portion of your employer’s contribution to your retirement scheme. 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. There is always the fear of old age. Doing so when you are broke is even scarier.