Looking for the right retirement savings plan for you? Here’s our quick guide.
Posted: Dec 22, 2016
Retirement is when you end your employment completely, may be willingly or out of circumstances. Whatever the case may be, you need to plan for your retirement years right from now. The retirement calculators come in very handy in this regard. However, to get the most out these retirement calculators, you need to keep in mind the following points:
1. A little research goes a long way: An accurate retirement planning requires the best possible retirement calculation. The retirement calculators which are easily available on the net these days are there to make this job easy. There are many factors that would influence your retirement planning like inflation and changes in wage rates. Inflation will continue during the 25-30 years of your retired life. And there might be changes in your income or wage during the employed period of your life. Although, most of the changes in wage rates occurs mostly during the initial years of your employment, however in some cases it may vary from person to person. The retirement calculators do have certain default values set for inflation and wage rate changes. But for a better retirement planning, you can do a little research yourself and customize the inflation or wage rate changes as per your needs. A little thought and time put into this during your employed life may prove very beneficial for your retirement plans in the long run.
- Study your investments: Based on your current retirement account balance and your present investments, the retirement calculators set a default investment return, most commonly assumed to be 8-10%. But, it must be noted here that the entire retirement planning scheme takes into account a very long period of time due to which it may not be safe to assume that these investment return rates will remain the same throughout the entire period. It is believed that in the present economic scenario, taking into account an investment return of 6-8% is a much safer bet for your retirement plans. You can do your bit in this case by studying your investment strategies or how you plan to invest in future and setting the values in the retirement calculator accordingly.
- Estimate your expenditure: It is almost impossible to estimate your future expenditure. You never know what's up next. However, while deciding on your retirement plans, you can estimate your future expenses by taking into account your current expenditure on an average. Whether or not you are a good budgeter, you can keep a tab on your expenses for a certain month and then decide. Next, you need to think about how your expenses will change after your retirement. For example, you would probably be spending more on your healthcare and lesser on your insurances after your retirement. Similary, certain other factors will also influence your retirement plans like your tax rates will lower down once you are retired or most probably you no longer have to pay monthly installments for your loans. These things need to be taken care while setting up values in the retirement calculator.
4. Estimate your income: Once you have estimated your expenses, the next step towards your retirement planning would be estimating how much income would you need to meet your expenses once you retire. You will have to be as accurate as you can be in this regard because the retirement calculator will ask for the approximate amount you would require to meet your expenses after your retirement. The retirement calculator asks you to choose whether you would need the same income as now to meet your expenses after retirement, a little less or a little more. Generally, people choose it to be a little less because their woud be many cut downs in your expenditure after your retirement like lower tax rates, closure of bank loans and you wouldn't need to save a portion for your retirement fund.
5. Review regularly: This entire retirement plan is not something that you can do once and leave it. It would require regular reviews. The ever fluctuating market scenario would eventually compel you to make changes on your retirement plans. Similarly, if there is a significant change in you job your lifestyle might change and you will have to change your retirement plans accordingly.Keeping this points in mind while planning your retirement will help you cope with the fluctuating market conditions in the long run. Make the most of these retirement calculators and decide accurately the actual worth of your savings in the long run.
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