Cents and Sensibility
Cents and Sensibility
Most individuals know they need to save for retirement, but often they aren't sure where to begin. "How much do I need to save each year?" "Can I maintain my current standard of living?" "When can I afford to retire?" Save now,
your retirement
clock is tickingTo begin developing a plan, you need to answer the following questions:
(1) At what age do you plan to retire?
(2) How many years will you spend in retirement? When estimating, you should plan to live to age 90 or 95.
(3) How much do you expect to receive from Social Security? Your local Social Security office should have an Earnings and Benefits Estimate form for you to complete and submit. You'll receive a report that estimates your personal Social Security payments at age 62, 65 and 70.
(4) What other sources of income do you expect? Does your employer provide a pension plan? If so, check with the plan administrators to see if they can estimate your monthly benefit or lump sum.
(5) How much do you have set aside as retirement savings? Include IRAs, savings accounts and company retirement plans (like 401ks, profit sharing or money purchase pension).
(6) How much income will you need in retirement? This is always a difficult question to answer. Most individuals assume that their expenses will go down upon retirement. That may be true -- you may no longer have a mortgage payment, but you'll have utilities, maintenance, insurance and property taxes on any home you own.
Budgeting for medical expenses, including insurance, is a must. Consider the following items to help you begin thinking about your annual expenses: housing, transportation, food, clothing, travel, personal care, medical, recreation, gifts/contributions, home care, maintenance, taxes and insurance.
Once you have gathered this information, ask your investment professional to prepare a savings projection for you. In a few minutes, you will have a good idea of what you need to save today for the retirement you deserve tomorrow.
Guy Steele is a financial planner and head
of the Pali Palms office of Edward Jones. Send
planning and investing questions to him at 970
N. Kalaheo Ave., Suite C-210, Kailua, HI, 96734,
or by email at: gsteele2@pixi.com