Saving for retirement can be one of the biggest financial planning challenges that you will ever face. The thought of retirement can cause a range of emotions anywhere from overwhelming to euphoric. Retirement is one of the few financial planning goals where there are no loans and no do-overs. Proper planning can pay off emotionally, and possibly financially, but it all starts with knowing how much to save for retirement.
Painting a Picture of Retirement
At the beginning of retirement planning, I often begin with a picture of what you want your retirement to be. If you know what you want in retirements, such as traveling, golfing, moving to a beach community or any number of things, you can start by writing them down. If you’re more of a visual planner, you can use the social site, Pinterest, to start building your “retirement board”. Pinning pictures can help create your dream retirement. It can also provide inspiration for the hard work that you’re about to put forth for retirement savings. The more time and effort you put into developing your retirement lifestyle, the clearer your retirement goal can become.
Once you’re done painting or pinning your retirement picture, you’ll want to figure out how much money you will need. Don’t get overwhelmed by the thought of the future prices, just understand what those costs are today. Breaking costs down on a monthly or annual basis can help make calculations easier later on. Once you know the costs, you’ll want to convert them to either all monthly or all annual numbers. In retirement, you most likely won’t have a mortgage, and possibly some other debts, but check your projected payoff dates to be sure.
Taking the time to think about your retirement and the associated cost, is a great start to creating your retirement plan. This is only the beginning, but can make the rest of your plan much easier to develop. Some other factors that will affect the retirement calculation are: sources of retirement income, portfolio returns, social security, healthcare costs, and inflation. Spending some time thinking about what you want to do in retirement can give your planner the tools needed to help you achieve your financial success. Calculations after goal development can get complicated and mistakes can be costly; speak with a financial planner to help you get your plan on track.