Can You Afford to Retire When You Reach Retirement Age?
Many people, after having invested much of their money into a safe retirementplanhelper.com/retirement-plans-for-self-employed.html">retirement plans for self employed, are ready to begin their retire with no money problems. In fact, have you actually taken the time to sit down with pen and calculator in hand to figure out exactly how much of your monthly expenses your 401k fund will cover? If you haven’t, you may be truly shocked when you finally do get around to it.
The majority of workers have never taken the time to come up with a long term money strategy for retirement. Unfortunately, for most people, doing so never seems to rise to that degree of importance. Yes they will save a bit here and there and a few may even have a organized savings plan where a certain sum of money is taken out of their paycheck weekly and deposited in a fund. But very few people go through the hard process of putting down in writing such basic facts as what age they plan to retire, how much money they’ll need when they retire, and how much money their fund will provide for them when they retire.
And that's something you don't want to do. It's also why when retirement arrives, many people will find out too late that the combination of their retirement funds will fall far short of enabling them to live comfortably. And when they decide to retire at the age of 60 or 65, they find that they have to return to work in order to meet expenses.
So, why does this scenario happen so often? And is it avoidable? To put it bluntly – it happens because they failed to make themselves a retirement plan. And yes, this situation is avoidable – if you don’t wait too late to start. So let’s start now.
Here’s a practical, easy way to at least begin to create a retirement plan. How much do you currently earn a month? Most experts figure that you’ll need at least 60 to 80% of your pre-retirement gross income to keep you at the same standard of living that you now enjoy. So let’s be conservative and figure that you’ll need 80% to be comfortable. So, if you make $4,000 a month, your retirement fund plus Social Security payments would have to provide you with at least $3,200 a month.
Then answer the question – what percent of my current living expenses, adjusted for inflation, will be covered by my current 401k fund, in addition to social security? Is it at least 80%? This part may take a bit of work on your part, but there are calculators all over the Internet that can help you to answer this question.
If you discover that your retirement fund as currently constituted will not provide you with this 80% of your pre-retirement gross income, you have one of two hard choices to make. You either make a conscious decision to lower your standard of living when you retire. Or, you make a conscious decision to increase the amount of money that will be in your fund when you retire. You can do this by either taking extra jobs and placing the excess money in your retirement account or by choosing more profitable investments. Whichever decision you choose, at least you won’t be going into your retirement years financially blind.
Admittedly, this quick and easy analysis of your retirement plan does not take into account many factors that a exhaustive analysis would. For example, we’ve left out factors such as whether your home will have been paid off at retirement, whether you’ll still be supporting your children at retirement, and whether you have other significant debt loads. But it is extremely worth it to you to map out a thorough retirement analysis plan as soon as possible. And even a quick and dirty plan such as this is more than most people do and is better than no plan at all which, sadly, is what most people have.
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