Warm sandy beaches, week-long cruises, reruns of your favorite TV programs, new hobbies and fun friends. These are the joys that come with retirement. They say that “Retirement is like a much-deserved vacation in Las Vegas. The idea is to enjoy it to the fullest but not so much that you run out of money.” This is your opportune time to rest after years of labor and exhaustion.
As much as this sounds lucrative and fun, retirement could also be a stressful stage of life especially if you are not financially prepared for the high costs of healthcare. Your current financial status will determine whether you are ready for retirement or not. However, there are various other ways to determine how comfortable you are likely to be in your golden years.
Crunch the Numbers
Anything you read always suggests you start by calculating how much money expect from social security, how much can be withdrawn from retirement and investment accounts and also how much you can earn when working during retirement. Start to map out your entire income, such as:
- Annual Income
- Personal Assets
- Social Security.
Compare your available income to your list of expenses. This is a start to determine whether you are ready for retirement. The budget of your living expenses means calculating how much you expect to spend on things such as, health care, housing, transportation, food, hobbies, gifts, trips. Be sure to check out The Budget Kit to guide you through this budgeting process.
Use the Income Replacement Ratio
Determine the approximate percentage of your current salary that you will need to earn in retirement in order to live comfortably. Experts say that you will need to generate at least 80% of the income that you earned before retirement. In this case, if you were earning $50,000, you will need to generate $40,000 during retirement.
Divide the Assets by Salary
In order to have an accurate figure on your retirement savings, you may need to hire a finance expert. However, several banks have created online calculators that are designed to help its members calculate their savings for retirement fast and easy. If you are not quite there yet, there is still time to catch up and secure your retirement future. You may also need to employ some money saving tactics such as credit reward cards for travel, purchase energy saving appliances, or opt for smaller vehicles especially if the kids are out of the nest. It’s never too late to up your savings in preparation for retirement.
The general guideline is to divide your retirement savings by your salary (current). It is advisable that you have 10 times your salary in savings. Eight times your salary should be saved by the time you are 60 and six times of it by the time you reach the age of 50.
Remember these are all basic guidelines, and your life may have many unique twists and turns that don’t quite fit into with some of these suggestions. Don’t let that deter you. Now is the time to be preparing for your future to be sure it comes as close to your vision as possible. At the same time, also remember retirement is about more than the money. Be sure to factor in and make plans for your new interests, hobbies, community involvement, sports and all the other aspects of a full life.