Retirement Preparedness for Peace of Mind
What does it take to retire and how do we prepare? Below are keys to prudent planning and preparedness.
$1 Project your retirement costs. There are several calculators that let you play around with expected expenses in your latter years. Try this one or this one. Understanding the amount you need to save is the first step to beginning your planning. Your 401(k), IRA, or employer-sponsored retirement account can build lion’s share of your saving, but this may not be enough. Knowing this is extremely important. If you are having trouble with expense calculation, use 90% of current expenses as an estimate.
$2 Know your entitlement amounts. Although Social Security may evaporate for millennials, for now it is still an important piece. There is a free, quick calculator on the Social Security Administration site that helps you ballpark your monthly payments. This estimate is rough and probably skews too low, as it assumes no increase in pay for the rest of your career. However, assuming less pay is better for planning. Also map out how much you will be able to draw monthly from your main retirement account (your provider should offer a calculator). Federal employees can use this calculator to figure out retirement payments along with Social Security.
$3 Set a gameplan for success. As you saw here, I am all about creating actionable gameplans. Define your retirement goal by forecasting future needs less your entitlement(s), then plan for the gap. Then consider additional retirement accounts, investing individually, soliciting financial planners, additional employment, etc to mind the gap. Planning to put away just a little bit at a time affords the compound interest that keeps steak and chicken on the table.