What is Retirement Planning?
Retirement planning involves the process of determining retirement income goals based on the expected amount of one’s consumption in dollars, the committed actions and financial decisions necessary to achieve those goals and the constant monitoring of the retirement plan. Retirement planning not only includes identifying sources of income to draw from but estimating expenses, implementing savings programs in various investments, accumulating assets and strategically managing those assets while considering costs, inflation and taxes.
How Much Money Will You Need to Retire?
Determining how much money you will need to live a comfortable retirement depends on how you plan to save, what investment types, styles and strategies you implement while considering taxes, inflation, and professional costs. If you want to maintain your current lifestyle before and after retirement, your numbers will be determined on how much income you need to provide for your desired lifestyle. The key factor here is your living expenditures or “consumption dollars during retirement” and the method to which you accumulate that desired lifestyle.
Calculating Your Retirement Lifestyle
Calculating how much retirement income one needs largely depends on the amount one plans to consume and spend during retirement – in other words, it is important to know your consumption in dollars.
Many people determine their retirement income needs based on a percentage of pre-retirement income or on a lump sum accumulated capital amount, but in any case, you will need 100% of consumption dollars. The fact is, your “number” can vary greatly depending on your personal situation, goals, how long you expect to live, your health, whether you will be single or with a spouse/partner, will you still be carrying debt, owning a home or not, family obligations (are you providing care to family members), and when you will actually retire.
Intended spending amount is key to calculating your required retirement number, but to have “comfort” or a “comfortable retirement” always add a buffer, as this can combat market downturns, rising costs, unforeseen expenditures.
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“I think of retirement planning differently. For me, it is about following a customized process and implementing a solid set of strategies that will enable one to achieve financial independence by a certain targeted date. It is not about ceasing to work entirely, it is about the choice that I can stop working if I wish, or that I can transition to another position, or second career, volunteer, pursue other meaningful passions if I so choose to. I want to know that I planned for future opportunities and covered all my bases in areas that will force me to stop working even if I did not want to. It is living my later years with peace of mind, with independence and dignity” ~ Marie DeLauretis