Whether you have years before retirement or you're almost there, it's never too early or too late to start planning. Wonder how much you should save? Follow these steps to help determine your answer.
Determine What Your Retirement Will Look Like
Start planning the details of your retirement and envision what you want it to be. Think about details such as what age you want to retire, whether you will stay in your current home or downsize, if you want to work a part-time job, and decide if traveling will become your new hobby. Think of anything that pertains to your lifestyle. Record these goals on a piece of paper as a visual reference.
Determine the Cost and Income
Now that your goals are listed, the next step is determining the costs of your goals. Also, it is important to determine the costs of living expenses. You can refer to your present budget to help calculate the future living expenses you will incur. Also, keep in mind that your healthcare costs and the cost of long-term care will more than likely rise, so make sure to note this increased expense. Next, estimate your retirement income from retirement savings, social security, pensions and annuities and other forms of income.
Make Necessary Adjustments
After your cost of retirement and estimated income are determined, you may notice a gap in what you have and what you will need. You can help resolve this by either increasing your savings and investments or adjusting your retirement plans. First, try to maximize your contributions into your retirement accounts such as an IRA or employer sponsored 401(k). Be sure to check out the IRS website for IRA and 401(k) yearly contribution maximums. Next, review your living expense budget to determine if any costs could be eliminated. You may even consider taking larger actions such as moving to a smaller home.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategy, if any, may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with a qualified tax advisor.