Planning for retirement is an important step in meeting your long-term goals. If you have an estimated retirement date, it's important to know monthly retirement contributions are on track so you can meet that goal. Understanding your retirement income needs and additional expenses is also important in the equation. Considering these factors will assist in forecasting a retirement date and making changes if needed.
Calculate how much money is needed for retirement. Retirement needs vary based on your current income and goals. According to MSN Money, most people require up to 85 percent of their pre-retirement income. For example, if your income before retirement was $60,000, and you need 85 percent of that, you will need $51,000 annually.
Add up extra costs. Account for extras, such as traveling during retirement. Decide how many vacations you plan on taking each year and the anticipated cost. Add this to your annual retirement income. For example, if you plan on spending $10,000 annually, your retirement needs are $61,000 annually, or $51,000 plus $10,000.
Tally funds saved. Dig out old retirement accounts, 401k plans and other retirement savings accounts. Add up account balances to determine how much is currently saved.
Calculate a retirement date. Use a retirement planner, such as the one offered by CNN Money, to determine how much income is needed to retire at your desired age. You will need to enter your current age, life expectancy, current savings and estimated contributions to get results.
Adjust contributions. If you come up short when plugging numbers into the retirement calculator, you can make additional contributions to meet your goals. Partner with a financial adviser for additional guidance.
Don’t forget to calculate changes in cost of living if you plan on moving. For example, if you move to a location with a higher cost of living, you will need more income to meet expenses. Check out cost of living changes with comparison tools.
Watch out for early retirement penalties. If you retire early, you may be subject to penalties. Talk with your accountant for more information.