If you’re like most baby boomers today, you want to know when you can finally make the leap towards retiring. After all, it’s a long journey getting to this point and knowing when you can finally set a day can be incredibly exciting. To get the answer, you have to think all the different aspect of retirement. There’s a lot more that goes into it than most people think, which is why understanding the details is so important. Fortunately there are a lot of resources out there and the tips below can help as well.
1. Calculate Your Income
Determining the amount of income you will have and the sources of that income is one of the most important steps to retiring. Below are some of the specifics you’ll need to think about.
– Will You Receive Social Security?
If you will be receiving social security benefits, start out by going online to create an account with the Social Security Administration. Once you have done this you will have access to all information you need about your benefits. It will also give you an estimate of how much you’ll receive every month depending on your age. This is an excellent resource that you can use with each passing year or just to plan for the future.
– Do You Have a Pension?
To learn how much you will receive for your pensions, contact the human resources department of your employer. They should be able to give you an estimate that you can use to plan your retirement with.
– What Are Your Investments?
If you have retirement accounts or other investments that you regularly add into, then you have to consider those for your total income. If you’re like most people, your retirement account is going to be your major source of income. To determine how much of this you can use every year, use this calculation.
a) Add up the sources of your retirement income and write the number down.
b) Subtract the number you get from your estimated annual expenses.
c) Multiply the difference you get by 25.
d) The number you end up with will give you the amount you should save for retirement, which is otherwise known as the “4% rule”.
2. Calculate How Much Your Annual Expenses Are
How much do you spend on a yearly basis? You have to know this so you can determine if you have enough money to retire. The first step that most financial planners recommend at this point is to create a monthly budget. There are many software programs and apps that can help with this and that are incredibly easy to use.
While it’s important to think about all the expenses you occur regularly, such as mortgage, gas, food, dining, electricity, tv, etc., you should also think about periodic payments. For example, insurance, property tax, and repairs should all be planned for within your budget. In addition to this, don’t forget about healthcare for your family.
Planning for Your Future
Once you understand where you’re at financially, planning for retirement won’t be nearly as challenging. You’ll have all the information you need to move forward and determine a good age to finally make retirement a reality.