Retirement planning is usually not on everyone’s agenda in busy life. If you can really plan in advance, your retirement won’t be a nightmare as it is for all those who enter into their retirement without any planning.
In your early years, you should ask yourself how much do I need to retire in life. Once you have a goal in place, you can make suitable plans to achieve them much early in your life. You need to make retirement plans according to your monthly income by keeping aside 10 to 15 percent of your income for retirement days. You should invest it judiciously by seeking guidance form financial advisers.
Though some of your expenses (commuting, etc) may reduce once you retire, but other expense (medical, etc) may increase manifold. So you need to include them in your planning as well.
You need to take inflation into account. You are not sure about what it would cost you few years from now, but with average inflation in mind, you can easily make calculation on money you would need for your daily expenses.
How much do I need to retire?
If you retire at the age of 65 and live up to 85, you will see that 1000 dollars lose their value over a period of twenty years. You will have to account for your cost of living, which normally increases at four percent every year. If you have invested in mutual funds that average same as stock market, 14 percent every year, and you leave five percent, then you draw out nine percent of your increase.
To ascertain the amount you would need for setting into retirement, you will have to figure out the annual income you would live off, on an average. You then have to multiply it number times 0.9 (9%) to ascertain the kind of nest egg you would need.
For example, if you set aside million dollars (an easy goal if you start saving in early twenties and continue with that for full 40 years) and you lived off 9 percent, you would definitely draw $ 90,000 every year. However, by leaving 5 percent in your nest egg, you can allow it to grow, thereby increasing your “salary” by about five percent. Therefore, $90,000 that you start with will continue to increase every year, allowing you to maintain your standard of living.
This retirement method not only to survive your retirement years in a decent way, but also allows you to leave significant inheritance for your children when you die.
Though million dollars may seem like a big money but if you start investing when you are young and continue faithfully for the rest of your life, you can easily attain this goal. You can do this even if you start old, and don’t need that much income in your retirement years.
So it is up to you to decide on the way you would want to retire. Whether you want a happy and planned retirement, or an unplanned retired life that is full of untold miseries for you and your family.