Learn the importance of successfully planning for your retirement years…
In the current market many soon-to-be retirees are feeling short-changed to a degree, as 2022 was not a good year for many in the financial markets. As a person who anticipates retiring and enjoying life abundantly in the future, it is imperative that you plan in advance to make a successful retirement a reality.
It is important that you realize that investment returns will go up and down from year to year but has historically averaged from 6% to 9%–which is more than you can get in most other places–relatively speaking.
In this discussion TheWealthIncreaser.com will focus on the importance of you choosing a portfolio that can lead you toward the goals that you desire–as you put a plan in place that will take you higher and higher–and lead to you reaching the retirement number that will not leave you in a quagmire.
Do the basics early so that you know where you stand
You must put yourself in position for a successful retirement by doing the basics or what you need to do on the front end. That includes creating a budget or cash flow statement, an income statement, a balance sheet and a net worth statement at the earliest time possible during your working years.
By doing so, you give yourself a helpful guide that can provide more direction as you formulate goals that are more precise and forward moving toward the lasting wealth building success that you need to achieve–and particularly your retirement planning success.
You want to at the earliest time possible contemplate the amount that it would take for you to feel confident about retiring and doing what brings you joy and happiness–consistently. There are a number of factors that you must consider (such as what your expenses will be) and unknowns (such as how long you’ll live) along with what you desire to do most during your retirement years.
You want to know the minimum number or baseline that you need to reach to pay your monthly expenses and live out the remainder of your life based on the life expectancy that you (or your financial planner) anticipate–based on sound analysis.
By using the 25x rule or other highly effective retirement planning formulas or techniques, you can get to your retirement funding in a manner that you can feel more comfortable as you approach your retirement.
The 25x rule, simply means that to stop earning new income (retire), you will want to have saved 25 times the amount you expect to need every year in retirement–as that should sufficiently fund your retirement for 25 years after you retire–and is generally a well planned life span for those who plan on retiring after age 60.
You can figure out what you’ll need for retirement using the 25x guideline by doing the following:
Your retirement calculation:
1. Start with your 25x number (25 times the amount you expect to need every year in retirement).
2. Subtract the savings you have today to get the savings you’ll need.
3. Estimate what your current savings may grow to by the time you reach, say, 62, by plugging that number into a compound interest calculator assuming a conservative 6%, 7%, 8% or 9% rate of growth.
4. Subtract that amount from your 25x number.
5. Divide the result by the amount you think you can save each year and you will have calculated the number of years you’ll need to get there.
1. Say your 25x number is $2,000,000. ($80,000 a year times 25)
2. Assume you’ve already saved $200,000. $2,000,000 – $200,000 = $1,800,000 (your target!)
3. If you’re 32 years old, by age 62 your $200,000 will be worth $1,522,451. (assuming 7% return compounded annually over 30 years)
4. $2,000,000 – $1,522,451 = $477,549 (subtract the amount from line 3 from your 25x number)
5. Say you can save $1,000 per month or $12,000 per year. (divide result from number 4 above by what you think you can save each year) $477,549 / $12,000 = 39.8 years
If you’re 32 now and have already saved $200,000, you could retire at 71 with 2 million in your account by saving $1,000 per month for roughly 40 years.
If you’re 32 now and have already saved $200,000 and you desire to retire at age 62 with 2 million, you would have to bump your monthly savings up to $1,333 per month or $16,000 annually ($477,549 / $16,000 = 29.8 years) for roughly 30 years.
Always remember that this is just an estimate, and there are more caveats (in addition to the ones above) as you must consider inflation and other factors that could eat into your savings–but your savings and investments may help offset that along the way if you attain the right return over time.
Always remember that investing always involves risk!
Although the stock market has traditionally averaged from 6% to 9% return on investments over a number of intervals–that does not mean your portfolio will meet that average as it could be higher or lower over your retirement savings interval.
Therefore, your assumed rate of return is not what may occur in actuality, and your rate of return over the years will depend on how you invest, save and allocate your money, including the level of risk in your portfolio and other political, regulatory, economic, societal, technological and legal happenings in your country!
The 6% to 9% return is a reasonable expectation based on the history of the S&P 500 Index–but their are periods where that average has been lower–and higher. You may want to consult a competent financial advisor if you want to be more precise in your calculations–and remember that financial markets don’t always act as they did in the past.
How Much Savings Will I Have When I Retire?
What will your portfolio numbers look like when you retire?
Here’s another way to figure it out!
The retirement calculation:
1. Think about how many years you plan to work.
2. Using an interest calculator, figure out what your current investments will be worth when you retire, assuming 6%, 7%, 8% or 9% annual growth.
3. Estimate your yearly savings.
4. Over ________ years, that regular contribution will get you to $________. (For comparison, if you just saved that money without investing it, you’d only have $__________).
5. Current Investment when you retire = $_________ + your yearly savings estimate over x number of years $___________ = $____________ or the amount you would have when you retired!
Note: You can also use a financial calculator if you are proficient in the use of one
Make adjustments as needed
You must not only have the commitment to do what you need to do–you must also continuously review, if you are sincere in making your dreams come true. That includes having a flexible mindset to make adjustments as adversity and life happenings that you did not or could not plan for–will occur.
Know what your retirement budget or monthly cash flow will look like
Retirement is a new era, but just like the rest of your life, it will all fall in place if you plan appropriately. In each stage of your life, your concerns, goals and budgets (cash flow) will vary–therefore effective planning is essential.
You may want to break down your retirement in intervals to help simplify your retirement.
● First 10 years of retirement. As you adjust to your new lifestyle, you’ll likely be in good health and excited by the transition into retirement and as long as you stick to your plan you can take vacations and enjoy life in a more bountiful manner. It is important that you don’t overdo it on spending, as you must withdraw your retirement savings accounts appropriately because those funds still have to last you a while!
● Second ten years of retirement. Hopefully you’ve had some fun during the first ten years, and now you might be settling down a bit—as spending usually drops some for most who are over age 70. If you have downsized or paid off a mortgage and your housing costs are down you should be in great shape. Be alert for home improvement or accessibility costs going up if you need them as you age, as well as healthcare costs. If your investments have done better than expected and you need some extra cash you can utilize that cash if you have saved appropriately.
Third ten years of retirement. At this point, you may have a need to move into an assisted living facility or even needing long-term care. You will likely spend less on everyday necessities, but be prepared for increased healthcare costs, especially if you need assistance. As you slow down, you can increase your percentage of withdrawals further, though keep in mind how much you want to leave behind in your estate for your heirs.
Put a plan into action that will lead you to reach your “retirement number” that will position you to do what you desire during your retirement years
You must put effective forward moving plans in place if you are to reach your retirement goals. That consists of knowing what you need to save annually to reach your desired goals and live out your life in a more joyful manner.
The 25x formula mentioned above or another retirement savings formula that provides you a way of reaching the number that you need to reach, can lead to you reaching the number that allows you to pay your monthly utilities, entertainment, taxes, charitable giving–along with traveling at the level that you desire during your retirement years.
It is important that you know the age that you want to retire along with the age that you can retire! Their is no secret to your retirement success, you must save and manage your money consistently until you reach your retirement number!
While you can’t tell you how many grey hairs will be on your head by the time you are able to retire, you can help reduce stress in your life and estimate roughly when you’ll be financially ready to enter the “retirement zone” that you always aspired to reach by planning proactively and expecting success!
You have already assessed how much you’ve been able to set aside so far by doing the analysis above–and you now know what you can save moving forward (again based on the analysis that you did above)–therefore you must now do and review–as you already have the plan—to make your dreams come true–or you will soon have one!
Additionally, you want to know how much social security and other income that you and/or your household will receive, know when your required minimum distributions are required for your various retirement accounts and know the taxes that you will have to pay during your retirement years at the federal, state and local level (particularly your income taxes at the state and federal level, property and sales taxes in your area–along with any other taxes in your area that could be of a burdensome nature).
It is important that you get out in front of your retirement planning so that you can achieve greater success!
With many now living well into their 80s and 90s–it is important that you plan for the years after you stop working with the expectation that you too will live well into your 80s or 90s (or beyond) so that you can enjoy life in a more bountiful manner.
You also want to be on the lookout for financial fraud as scammers are highly adept at creating accounts using your identity and getting your retirement benefits–particularly utilizing phishing scams and setting up fraudulent social security accounts.
Whether you anticipate receiving traditional IRA income, ROTH IRA income, pension income, 401k income, 403b income, railroad retirement benefits, government thrift savings plan payments, social security or any other source, you want to proactively plan for what those payments will be (in total) at the earliest time possible–if possible (no pun intended).
The monthly retirement payments that you will receive must be clear in your mind and not vague or cloudy–or even worse not even in the ballpark of what you need to carry on with your life in the manner that you intended–as no one cares more about you–than you–and that is as it should be.
By making a “real effort” to reach your “retirement number” you can put yourself in position to have a more rewarding and enjoyable retirement.
By applying what you sincerely feel can help you achieve your retirement goals more efficiently you will be putting yourself and your family in a better position as you age–and it is the desire of TheWealthIncreaser.com–that you will do just that as a result of visiting this page.
You want to know at the earliest time possible what you value as far as saving for a more rewarding retirement and you want to put plans in place for what will happen after you transition because there is a good chance that you will have assets when you transition–and “you” can decide where they go if you plan now.
It is important that you utilize the values that you have acquired over your lifetime that are positive and uplifting so that you can reach your “retirement number” and improve humanity while you are here on planet earth–and even after you transition?
All the best as you operate daily at a level that will lead to your retirement success…
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