There’s no time like the present to start thinking about your retirement budget — even if retirement is still several years away. By looking ahead, you’ll be able to see if the money you’ve saved will be adequate to meet your retirement needs.
You probably have two general goals for your retirement savings. Your first goal is to have enough money to cover your basic living expenses: rent or mortgage, food, utilities, taxes, transportation, insurance, and so on. Your second goal is to have enough to pay for the extra things you’d like to do during retirement: travel, pursue hobbies, spend time with family, relocate, or any other plans you’ve dreamed about.
You probably have a good idea of how much your basic expenses will be, but what about the extras? Think about how much they will cost. If it’s more than you think you’ll be able to afford, you should consider increasing your retirement plan contribution while you’re still working.
You’re probably covered by your employer’s plan right now, but what about after you retire? Health-care coverage can take a big chunk out of your retirement income. Medicare provides only basic coverage — and you have to pay for it. Unless your employer offers retiree health insurance, you’ll probably want to buy a supplemental policy as well.
Your financial professional can assist you with designing a spending plan. First, write down all the expenses — basic and extra — that you expect to have in retirement. Then, estimate your retirement income from all sources — pensions, employer retirement plans, individual retirement accounts, Social Security, etc. Will you have enough income? If not, start thinking of ways to increase it. Contributing more to your plan, continuing to work for a few additional years, or getting a part-time job in retirement are possibilities to consider.
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