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For many, retirement seems like a far-away stage of their lives, filled with carefree days with nothing to do but travel, sip wine and watch the sun set. While this may be the reality for some, for most people who don’t budget properly for retirement, their golden years are filled with work and penny pinching, not relaxing. Planning a budget for retiring is extremely important and a vital tool to properly saving.
A commonly used mathematical approach is to say that you need, on average 70 or 80 percent of what you make now per year to live on once you retire. A big part of what you need to figure in is how you plan on spending your retirement years. If you’re looking to travel the world and stay at 5-star hotels, you might want to budget on the high side. If you’re happy staying at home and relaxing, you can budget on the lower end.
To figure out your retirement budget, there a few things you need to do. First, figure out where your retirement income is going to come from and how much of it there will be. Most people get retirement income from a variety of sources like the 401(k) plan they had at various jobs they worked over the years, social security payments, retirement investments and savings as well as any possible income from a job that you would work after retirement. To figure how much you would be getting from social security, check the statements they send you in the mail and the amount you would be getting is broken down there.
The next logical step is to try to estimate your list of expenses. While this can be extremely difficult for those that are looking decades ahead, it’s best to try to put together some kind of plan. The best way to approach it is to itemize your expenses and break them down by category, such as living expenses, utilities, health care and so on.
A few final tips that can help you in the long run is to try to take care of all of your debt before you retire. Paying off the credit cards or your mortgage in one lump sum will help you out in the long run.
Don’t forget any possible dependants. If you are responsible for the expenses of others, you must figure them in, too.
Retirement can either be a wonderful time filled with happiness or it can be a scary time filled with uncertainty. The road you walk down is up to you. The choices you make now will influence how you spend the best years of your life.
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