Retirement is not just a span used to define pops anymore. It is an entitlement you deserve after your years of service to the society and nation. The one question that bugs all the retirees is, if they are going to have enough savings to maintain their current lifestyle. Most of the expert’s advice is that you need 80% of your current income to continue with your present lifestyle. Though the exact amount can vary depending on the individual’s life choices, but, there are certain common factors to consider before making a retirement plan.
Factors to Consider for Retirement Savings Plan
The factors include your age of retirement; at what age you want to retire? You can also consider if your partner is going to retire with you as well. You must check if you are eligible for your employer’s retirement savings plan like 401 (k) plan or a traditional pension plan and don’t forget to do a competitive analysis between the two. You can also consider your post-retirement way of residing; if you will rent or buy a home? You must consider your willingness to work part time after retirement, out of passion or to kill time. If you want to pursue a costly hobby which involves a huge expenditure, then put it in your considerations for your retirement savings plan. Last but not the least, an important factor is your medical insurance. Is it going to be the same as before or the coverage will change?
Ways to save enough for your Retirement Savings Plan
- Start Saving Now
You must have heard this saying which goes like this, “A rich man saves first, then spends the remaining and a poor man spends first and saves what’s remaining.” Saving is rewarding, every single time, you will never regret saving. If you aren’t doing it already, then, start it now. The sooner you start, the more you will save. Start small if you can and increase it month after month. Understand the fact that retirement is inevitable and you need to devise a plan for it, now.
- Plan your Needs
Plan your post retirement needs as you reach closer. As I mentioned earlier that according to experts, you need approximately 80% of your preretirement earnings to continue your lifestyle after, but, this percentage varies on the amount of your income. If you belong to a high income group then you may need to earn maybe 65-70% of your actual earning after the retirement but, if you belong to a low income group, then those numbers can go as high as 90-95%.
- Contribute in your employer’s plan
If your firm offers you a retirement savings plan in the form of 401 (k), do sign up for it and try to get maximum benefit out of it. It will not only help you save in taxes, but also, ultimately, the amount you will accumulate through compound interest and tax rearrangements will make a huge difference.
- Don’t forget the basic principles of investment
Try and understand the pension plan and how it is invested. The type of investment you make plays is vital to know calculate how much you will have saved after retirement. Always diversify your investments to reduce the risk and improvised return on investment. Always find time for your financial education, because your future depends on it.
Forecast your Retirement Savings
You can simply forecast your retirement savings by using a savings calculator. You just have to insert values like your current annual income, your desired percentage of retirement income, the expected inflation rate in the future, your average annual decrease in spending, your current age, desired retirement age, life expectancy, your expected annual pension, social security benefits, your age at which you expect to take benefit of your social security and your assumed return on investment. Put these details online and calculate how much you need to save to continue living with a similar routine.