Answer These Five Questions If You Want To Retire With Enough Money - By: Eric Bayne

How much income do you need when you retire and will you have that much money at retirement time? The best way to know for sure is to begin the process of putting together your retirement spreadsheet today. Before you start your spreadsheet, however, you are going to need to answer the following three critical questions:

How much do you want to make a year, in today's dollars, when you retire? Or, to put it another way, if you were to retire right now, what yearly salary would you require in order to keep you living in the fashion to which you have become accustomed. The majority of worksheets and calculators will have built into them projected appraisals for inflation and will be capable of using this figure to compute approximately the amount of annual income you'll need when you retire.

What number of years remain until you retire? This is crucial as it's the number of years that you have left in which to contribute funds to your financial portfolio. The computer worksheet will take the value of your present investment portfolio and add to it any anticipated donations up to the retirement date. The computation will predict approximately what amount of income you can expect to have when you retire. If this dollar amount is less than what you require, you will have to ether add more money to your portfolio, alteration your investing strategy, or lower you expected standards of living at retirement.

What is the sum of all your sources of expected retirement income? This includes your expected Social Security income as well as any of the following investment plans - 401k, 403b, 457, Keoghs, SEP, IRA, and pension plans. It's important to get as concrete figures as you can and put them on paper. This helps to avoid the rose colored glasses scenario where you think you have more money than you actually do. A major cause of people getting to retirement and being shocked that they don't have enough money to live at their current lifestyle level is their failure at an earlier age to take a hard look at their financial situation when they had plenty of time to do something about it.

How many years do you expect your retirement fund to last? This can be a highly sensitive question as it gets into life expectancy and mortality issues. When you start to collect Social Security, your earnings from it will be comparatively constant. But if you're like most people, Social Security will cover less than half of your desired income. And in a lot of cases, it'll cover considerably less. This means that the rest of your investments have to supply your remaining income. In the best of circumstances, you will be able to live off of a combination of the interest and dividends from your investments and not have to touch the principal. On the other hand, if you are pressured to begin taking money from the principal, your annual income from it will continue to decrease until it's used up. Knowing how many years your retirement funds will be necessary will help you make the decision as to whether you should start to draw the principal down or accept a lowered standard of living.

How is your health? For many retired people, their medical bills are their biggest out of pocket expense when they retire. Even with Medicare, you may have deductibles to pay for. We can't look into the future and say for certain what our health will be at retirement. But if you already are taking medical treatments for a disease such as high blood pressure, diabetes, cancer, and so on - you can be almost certain that those bills will increase significantly as you reach retirement age. Many people when making their retirement plan, forget planning for future medical bills. But now, before your retirement, is the best time to do this.

About the Author

Eric Bayne is writer and researcher for http://www.retirementplanhelper.com . Visit his site to find out where he'll answer questions such as what are 401k plans and other retirement related questions.

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