You know how important it is to plan for your retirement, but where do you begin?
- Use your current income as a starting point: It's common to discuss desired annual retirement income as a percentage of your current income. The appeal of this approach lies in its simplicity, and the fact that there's a fairly common-sense analysis underlying it: Your current income sustains your present lifestyle, so taking that income and reducing it by a specific percentage to reflect the fact that there will be certain expenses you'll no longer be liable for (e.g., payroll taxes) will, theoretically, allow you to sustain your current lifestyle.
- Project your retirement expenses: Your annual income during retirement should be enough (or more than enough) to meet your retirement expenses. Estimating those expenses is a big piece of the retirement planning puzzle.
- Decide when you'll retire: The longer your retirement, the more years of income you'll need to fund it. The length of your retirement will depend partly on when you plan to retire. This important decision typically revolves around your personal goals and financial situation. Although it's great to have the flexibility to choose when you'll retire, it's important to remember that retiring at 50 will end up costing you a lot more than retiring at 65.
For additional help on estimating your retirement income needs, please contact our financial advisor, David Elster. Contact David directly at 858-805-7949 or firstname.lastname@example.org.