Mapping Out Your Retirement
When vacation time comes around and you plan that road trip with your family, don't you map things out, decide where you'll stay each night, what attractions there are to see and how much money it will cost you? Don't you think you should map out your retirement with the same care?
Unlike vacation, which comes around once every year or so, you only get one shot at retirement. But you also have longer to plan for it. If you plan well and have a solid map for the journey, you'll make sure your golden years live up to your expectations.
So, where do you start? At the beginning, of course.
Look at your current lifestyle, then picture what you think you want your life to be like in retirement.
Take a blank sheet of paper, and answer some questions. Do you want to stay living where you are now or move? If you move, will it be to a big city or to the country? Will you move far away or just a short distance? How will you fill your days? Travel, participating in leisure activities, going back to school – all are possibilities. They represent a lifestyle, one of the future, and that lifestyle will help you determine how much money you will need.
Estimate your expenses by evaluating the lifestyle you're envisioning.
Drawing up a preliminary budget can help you plan for the future. How in-depth your budget gets depends on where you are in your life now. If you're in your 20s, it's best to just start saving as much money as you can. By the time you reach your 50s, though, you'll need to have narrowed some things down. In general, a good estimate is that you'll need about 80% of the income you currently have. But depending on your future lifestyle choices, that figure can go up or down.
Figure out how much money you'll be making in retirement and where it is coming from.
While everyone's situation is unique, most people get income from a few places – Social Security, a company pension plan, an employer-sponsored retirement savings plan such as a 401(k), plus personal savings plans like IRAs and any non-retirement savings or investments. Some people also work part-time to supplement their income during retirement.
Carefully consider when you want to retire.
While retiring sooner may sound ideal, you will have less time to make money, and thus, less time to save money. Quite frankly, you might not be able to afford the type of lifestyle you are looking at if you retire early. The earliest you can begin receiving partial Social Security benefits is age 62, but you cannot receive full benefits until you are 67.
Plan for a 4% withdrawal solution.
Estimate that you'll use 4% of your savings every year, but also allow for 3-4% inflation on that. For instance, if you take out $10,000 the first year, the following year you'll really need to take out $10,300.
Lost? There is a difference in following a map and drawing up one. If you find yourself lost and in need of assistance in this mapping process, contact National Iron Bank. We specialize on getting people back on the highway of life and headed in the right direction toward the retirement of their dreams.