Steps to determine financial needs for retirementAuthor: Joy Mali
How much money do you need to retire? That's a question that young professionals don't seem to be worried about but at this stage of their lives, this is quite important to already consider since retirement planning starts out this young - and not later.
One of the first steps that you need to do is to find out at what age you'll be retiring and how much money you'll be spending during your retirement years. Once you have figured this out, you can ask the help of online calculators to determine how much you'll be spending and how much you'll be keeping to yourself.
According to Forbes.com, you really need to ask yourself these questions: Is your income declining or rising? What about your student loans - is it hurting your credit report? Are your investments doing well to augment and increasing your income or doing well for your needs? What can you do about all of these then?
Here are four ways to make sure that when you do retire, you have some money in the bank and in your hands - at your disposal.
Find out your retirement expenses- To know how much funds you'll need to retire, you need to compute how much you'll be spending on your retirement expenses. Consider the following costs: accommodations, food, retirement home (when necessary), medical expenses, leisure and play, among others. You need to also include how much taxes you are going to spend on your retirement income.
Discover how much money you can earn through some certain sources- When you do some retirement planning, you also need to figure out how much income you are going to make from available resources. This could be a family member who is giving you a monthly wage or your earnings or rewards from your banks. Once you have figured out how much you are earning, compare this with your retirement expenses - minus and subtract.
Look at the gap between the income you have incurred and the money you need to shell out- You also need to figure out how much the gap between the income earned and the expenses spent. Once you know the answer, ask these questions to yourself. Is what is left enough for me to live by? Do I need to adjust my income or my expenses so I can have enough? What should be the income earned or do I need to lessen my expenses?
Consider life expectancy and inflation- You need to factor in any of the following information: life expectancy, return on investments, the affects of inflation and your agreement to use principal will all have a profound impact on the expenses you are going to make. In order to make your goals realistic, you need to think about the best and the worst case scenario. For instance when you want to use your credit card, it's better to get your credit report checked to make sure that the available balance is still intact and at hand.
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About the Author
Joy is an active blogger who is fond of sharing interesting finance management tips to encourage people to manage their personal finances. More specifically, she advocates that people should monitor credit scores regularly. Follow Joy and discover ways to determine how much you need to retire.