Practical Guide for Planning Your Retirement
Retirement is becoming more difficult due to rising costs of medical insurance and the possibility of Social Security being cut or not even available. Many people who work hard are forced to save as much money as they can to avoid any hardships. No matter your age, if you want to be among one of the sustainable seniors, it is important to begin planning for retirement as soon as you can.
Determine Your Expected Retirement Age
Your retirement planning will be greatly affected by your decision. Although it is impossible to predict exactly when you will retire, planning can help you make informed decisions. Social Security regulations allow your retirement age to be before or after your “full” retirement age. However, benefits will not begin until you turn 62. By retiring past your full retirement age, it allows you to receive full Social Security benefits. At any point, retiring between 62 and your full retirement age slightly decreases your benefits, depending on how close your age is to 62. If you are in doubt, use your full retirement age.
Estimate Your Life Expectancy
It is difficult to imagine how you would live your entire life. However, it is necessary to calculate your life expectancy to estimate the number of years that you will need to save for retirement. According to the SSA, the average American male can expect a life expectancy of around 84 years, and women can expect to live to 87. A quarter of all Americans (for both genders), will live beyond 90 while a third will live to 95. To determine how long you can expect, consider your lifestyle and family history.
Consider Whether You Will Work Beyond Retirement
Until you reach full retirement age, your Social Security benefits may be reduced if you are still working. This will depend on how much you earn each year. After you reach full retirement age, however, there is no limit on the amount you can make each calendar year. You should also consider whether or not your plans to continue working after retirement when determining how much you can save.
Calculate Your Retirement Costs
To begin, determine the length of retirement. This is simply your estimated life expectancy divided by your expected retirement date. If you plan to retire at 65 and are a male (life expectancy 85), it is recommended that you have at least 20 years before you retire. The standard rule of thumb to calculate retirement expenses is to multiply your income before retirement by 70 percent. If you make $60,000 per year before retiring, that would translate into $42,000 per annum in retirement expenses. You would need to retire in 20 years if you have a $60,000 salary. That’s $840,000.
