How do I calculate my retirement?

Have you ever thought that calculating retirement expenses feels a bit like trying to read a different language? Those numbers, investments, and financial jargon can quickly become confusing.

Before working with a financial advisor, taking the initial steps to understand your retirement finances can be immensely beneficial. It empowers you to have more informed discussions with experts and ensures that you play an active role in shaping your retirement.

That’s why we’ve crafted this 5-minute guide to help you get in the ‘retirement ready’ mindset.

1. Start with the basics: First things first, let’s determine your current expenses. Take a quick peek at your monthly budget. What are you spending on essentials like housing, groceries, and that indispensable morning coffee? Now, factor in those delightful discretionary expenses, like vacations and dining out. Don’t forget to account for any potential debt repayments and you’ve got your current monthly spending.

2. Anticipate your future desires: Beyond the essentials, think about your post-retirement dreams. Is it travel, pursuing a new hobby, or perhaps dedicating more time to philanthropic endeavors? By visualizing the lifestyle you aspire to lead, you can better estimate the additional expenses that might arise, helping you plan for a retirement that aligns with your passions and goals.

3. Calculate your retirement income: The good news is, your retirement income might come from various sources. There’s the Social Security safety net, your retirement savings, and potentially even some rental income or dividends from investments. Make a list of these income streams, and estimate how much they’ll contribute to your post-career life. Feeling motivated? Boost your retirement savings by consistently contributing to a 401(k) or an IRA – it’s like planting financial seeds for your golden years.

4. Set your retirement savings target: Consider how much you’d like to have annually during retirement. Keep in mind that experts often recommend aiming for about 70-80% of your pre-retirement income to maintain your lifestyle. Divide this annual amount by 12, and you’ll have your monthly retirement goal. Simply subtract your estimated retirement income from this goal, and you’ll know how much you should save each month to bask in the glory of your well-deserved retirement.

And there you have it—how to start calculating your retirement in 5 minutes flat! Remember, this plan isn’t set in stone; it’s a flexible roadmap that can evolve with you. Keep nurturing those retirement savings, stay curious about investment opportunities, and cherish the dreams that led you here.