Everyone dreams of the day that he or she can retire and be free to enjoy every moment of life. To live comfortably during retirement, we need to save our pennies during our working years. Determining how much to save requires knowing our ideal retirement age.
You will need:
- Calculator or spreadsheet software and computer
- Retirement calculator (can be found in a software package or online)
- List of assets and liabilities
- Estimated inflation figures
- Expected Social Security benefits
- IRA maturation figure
Step 1: Total the current and projected assets. This includes employment income, real estate holdings, stocks, and other investments. Also include your expected Social Security benefits and IRA value at maturation.
Step 2: Total the current and projected liabilities, including taxes, car payments, and mortgage payments.
Step 3: For any areas in which you are unable to obtain an exact figure, make an estimate.
Step 4: Enter the asset and liability figures into a retirement calculator. The result will be an estimated retirement date, which is the date the necessary cash flow will be achieved to be able to maintain the current lifestyle without relying on additional income.
Step 5: Typically, retirees can exist on between 70 and 90 percent of the previous annual income but this can vary. Anyone who has done well with investing or plans to downscale the lifestyle should be able to retire earlier. Those who have financial issues or made poor investments may want to gradually decline the hours worked or work several more years than initially planned.
Step 6: Between now and the time of retirement, the income stream can fluctuate. Therefore, the plan should be periodically reviewed to ensure that the benchmarks are being met. If they are not, the plan may need to be reevaluated.