Many of us view retirement as a concept too distant to immediately affect us. We prefer putting all our energy on family expenses and mortgage settlements. The younger you are, the lesser the thought of saving for retirement is appealing. At around age 40, your finances may be directed towards a business venture or college fees for your kids. After a while, your fifties arrive and with them, the realization that retirement is nearing; this can be scary. It then dawns on you how little time you have left to plan.
We all fear the thought of retirement for various reasons. Thinking of the reality of old age is daunting for many. 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. This is the only way you will plan sufficiently. 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 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. It costs a lot to sustain these needs. You can calculate roughly what is required. The first agenda would be to assess your monthly income, then compare it with your lifestyle. Where necessary, do some adjustments.
Point out those expenses, your package sorts out. 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. Add next the amount necessary to cover incidentals like house and car repairs.
The next step is subtraction of expenses that will disappear at retirement. Examples are work transport costs. What you spend on work clothes can also be subtracted. Professional development costs will cease too. Subtract to the amount you pay for loans you have. Typically, mortgage installments come to mind.
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. Joining forces is a sure way to lessening the costs. 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. It should eventually produce a good savings plan.
Your retirement savings plan should be sufficient and well protected. Approaching retirement is unsettling for most people. Getting old while poor is far much worse.