What You Should Know About Retirement
When planning for the future, you must consider many variables. Some of us might have children. Some of us might want to travel around the world. Some of us might even just want to find a small, quaint, little town to ride out in a blaze of glory. But if one thing is for sure, it's that you're specific dreams of what retirement is like will affect how you prepare for it. One part of planning for the future will be consistent for everyone; we all need to plan for retirement.
The first tip of the day is don't let the words planning for retirement fool you. I know at one point we've all said that you're too young and don't need to start planning now or that you'll never end up retiring. Maybe you've said that there are many years ahead to start planning. We've all heard ourselves say it. But it's completely wrong. Wrong, wrong, wrong.
Everyone should be planning for retirement irrespective of age, plans, or current situations. So when should you start planning for retirement? The answer is now- the sooner the better. The younger you are the better. Some people are actually retiring as early as age 55 not 65. You're retirement years could could well add up to be greater than your working years. But the key is you'd better be doing it; even if your not so young.
Now that you have the answer to the "when" question, you're probably asking yourself "Okay well how much?" The issue with this question is that the amount will definitely vary widely. Most people might not settle for the quick answer of more than you'd expect, but if you were to ask a retired individual you'd get the answer of "there is never enough."
The question remains, how much will you need? How much is enough? Well it turns out that it really depends on how you want to live in your retirement years. If you'd like to travel around the world, you're going to need a bit more than those who simply want to continue how they are currently living. The general consensus is you will need roughly 75 to 80% of your current annual income, which should allow you to maintain your current life style.
You may be asking yourself "Well where does this 80% number come from?" Professional financial advisers derive this figure because, in general, your cost of living will decrease in certain areas. For example your gas consumption will decrease because you may no longer be the commuter you once were; commuting back and forth to work. You're going to be in a lower tax bracket due to your decrease in income, so you will have more income dollars left. You might have also paid off your mortgage, if you have one, by the time you retire.
But some living expenses might also increase. You might be staying home more often therefor you may have an increased utility bill. Maybe you get bored with staying at home so you get out of the house to play a round of golf or drive down the coast once a week; this will obviously both increase gas consumption and increase leisure expenses.
The good thing though is the government will provide some support, for a few more years anyway. Social Security, and Medicare provide some retirement benefits that will offset the cost of living and health care expenses. But, to be on the safe side, plan on receiving less of these benefits and consider them to be a bit of help; not a guarantee.
Often times people will tell themselves "Oh I don't need to worry about saving too much money for retirement because I'm not going to live that long." Truth is people are living longer these days. Don't cheat yourself. Over planning won't hurt a thing. With the advances in medicine we are, in fact, living longer. Not only are we living longer, but we are living healthier as well. This might be because, in our retirement years, we're not sitting on the couch watching Chips reruns. We're getting out and enjoying life.
Don't forget about inflation because the value of your money can dwindle before your eyes. This is why retirement planning is definitely for everyone and the sooner you start to plan for it, the better off you will be.
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