Before you can start planning how to save for your retirement, you first need to determine how much you need to save. It might be more than you would expect, save at a few places like Eden Retirement Living. Below you will find some of the basic needs that you will need to calculate to determine how much you will need to save.
Your Current Income
A good place to start your calculations would be your current income. Most investment advisors will tell you that you will need to save between 60 and 90 percent of your current income to live off of each year. This need will vary for everyone. Meeting with a knowledgeable and experienced financial advisor will help you to exactly pinpoint your needs. They will take into consideration the kind of lifestyle that you wish to maintain during your retirement and the amount of traveling that you plan on doing. They can also help you to determine some of your current expenses that you may desire to cut down on so you can reach your future goals.
Projecting Retirement Expenses
A large part of calculating your future needs is determining what you currently spend. This can be a time-consuming process, but it will benefit you in the long run. Below is a list of common expenses that you will need to calculate how much you spend annually on.
- Food
- Mortgage Payment or Rent
- Utilities
- Insurance (Homeowners, Renters, Car, Health, Life, Disability, Long-term care, etc.)
- Health Care Costs (Copays, deductibles, etc.)
- Taxes
- Debts (Loans, credit cards, etc.)
- Education
- Savings and Investments (contributions to IRAs or other investment accounts)
- Clothing
- Recreation (travel, hobbies, eating out, other leisure activities)
These are just a few of possibly many other categories. You also need to keep in mind that during your retirement your need for some expenses may go down (such as education or your house payment) while your need for other expenses may go up (such as health care). If you have a financial plan or would like to have a financial plan done, your financial advisor will go over these categories with you as well as many others. They will also be able to calculate the rise in the cost of living to more accurately calculate your needs.
Choosing Your Retirement Date
Setting a definite time of when you want to retire is also important. You need to have this date in mind because it will determine the length of your retirement. If you wish to retire at a younger age you will need to save for more years of retirement, whereas if you are planning on retiring later in life you will a shorter retirement to save for. It also will help your financial planner determine how aggressive you need to be with saving over the years to reach your retirement goals.
Life Expectancy
No one likes to think about their own mortality, but it is an important factor in retirement planning. It will help you determine how long you will need to be able to provide for yourself. Financial planners can use statistics and other factors to help guesstimate how long you will live. But it is important to keep in mind that with ever-advancing medical technology, you may need to save up for more years than you would think.
Backup Plan
Unfortunately, despite all the planning that we do, sometimes unforeseen circumstances happen that throw us off course. It is important that you have an alternative plan for any issues that may arise on your path to retirement. Whether it is that you lose your job, or lose money in investments that you have, always be sure that you have another income stream that you can fall back on. A good investment advisor will help you to allocate your money into several different types of investments so that even if one fails, you can be assured you will have a backup.
Overview
The path to retirement can seem long and complicated, but with proper professional help and planning, you can be successful and enjoy the retirement that you always dreamed of.