| Many people do not think about the answer to this | | | | funding for a new recreational vehicle. |
| question until it is too late. In fact, a recent study by | | | | Once you are satisfied with your income estimate, |
| the American Savings Education Council found that | | | | you need to convert that income figure to a total |
| only 42% of workers had estimated the amount | | | | amount needed at retirement. A good rule of thumb |
| they would need to live comfortably in retirement. Of | | | | is to estimate an annual withdrawal rate of 4-5%. For |
| course, the correct answer will depend on the | | | | example, if you will need $75,000 per year in |
| individual and their desired post-retirement lifestyle. | | | | retirement with a 4% withdrawal rate, you will need |
| People who do not have an accurate measure of | | | | a total of $1,875,000 in your retirement savings |
| their future financial needs will often work longer than | | | | account to draw from. |
| they need to or retire too early and run out of | | | | Now that you know how much you will need to |
| savings. Not having an accurate goal for retirement | | | | save, it's time to figure out how to get there. The |
| income can also lead to choosing the wrong type of | | | | math involved in calculating the future value of |
| investment vehicle. While there is no set amount that | | | | investments is beyond the scope of this article, but |
| will be right for everyone, there are several steps | | | | there are many online retirement planners that can |
| that can be taken to come up with an accurate | | | | perform the calculations for you. Before committing |
| estimate. | | | | to any investment plan, it is also a good idea to run |
| Start off by estimating the amount of income you | | | | through your calculations again with a professional |
| will need in retirement. Seventy-five to eighty-five | | | | financial planner. Paying a small fee now can save you |
| percent of pre-retirement income is a good starting | | | | costly mistakes down the road. |
| point. Remember to include any pension payments | | | | Once you have established your initial plan for |
| you may be entitled to. Depending on your age, | | | | retirement savings, review it periodically to make sure |
| Social Security may also be a factor (it is far less of | | | | you're still on track to meet your goals. The |
| a sure thing for younger workers than those close to | | | | pre-retirement accumulation period can span many |
| retirement). Also, don't forget to adjust your income | | | | years, even decades. During this time, changes in |
| figures for taxes or you will end up far short of your | | | | financial circumstances, marital status, and number |
| goal. | | | | and age of children can drastically affect your |
| Those planning to retire early (between the ages of | | | | retirement calculations. |
| 55 and 65 presents) will face different financial | | | | Having a plan for your early in your career will help |
| challenges, as they are likely to still be in good health | | | | you live a comfortable life in your golden years. Many |
| and be very active in the early stages of their | | | | people neglect this area of their financial planning and |
| retirement. Many early retirees take advantage of | | | | work longer than they must or retire without |
| their newfound freedom by traveling or purchasing | | | | adequate savings. By the time retirement comes |
| cars, vacation homes, boats, etc. Often times, there | | | | around, it is far too late to correct any errors in |
| will be a reallocation of capital assets to offset these | | | | planning and the individual's post-retirement lifestyle |
| additional purchases. For example, downsizing the | | | | will be diminished. |
| family home once the kids are gone may provide the | | | | |