Assessing retirement
When you assess your retirement there is more to take into consideration then just how much money you want each month to live on. You do not know how long you will live. You do not know what inflation rates will be life. You do not know what your situation will be like. So, how can you assess your retirement and plan the best way possible? Try the following:
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Start by determining when you plan to retire. The age you plan to retire will affect how aggressively you have to save and what course of action you plan to take as you prepare for retirement. If you are 60 and want to retire at 65, and have not done anything to plan for it, you will have to take a far different course of action than if you are 20 planning to retire at 65.
Determine how long you will likely live. Part of planning for retirement is planning for the kind of life you want to lead after you retire. This means determining how much money you want to have each year, and how you are going to get it. So, how long will you live, and how will you get some money each time you need it in order to decide how much you need.
Determine the kind of lifestyle you intend to have. The amount you need to save for retirement, and your plan for having a residual income of some kind will depend on how you want to live. Do you want to travel? Do you want to spoil your grandchildren? Do you want to sit at home clipping coupons? These are two different ways of living, so which would you prefer?
Determine how much money after taxes you will need, and thus how to save in order to have that. Even with tax deferred, non-taxed, and tax exempt accounts, you are going to be faced with the government getting a piece of your retirement, so while you may have a million dollars in your retirement account, seemingly enough to retire well on, continue making money etc. if the government takes half that in taxes, your retirement is not nearly as good.
Determine your insurance needs. One of your biggest expenses when you retire is your insurance. This is in place to help protect your assets, so make sure that when you plan your retirement, you do not just plan for fun, but also for the cost of insurance.
Will your home, car, time share, etc. be paid off? If it is not, you have to plan to meet your mortgage, and your other expectations in life. When you assess your retirement you can't assume you will be out of debt completely with your home paid off, so plan for the worst to get the best.
