February 22, 2010

Everyone will retire from work one day. People are living longer so when you retire, you could live another twenty or thirty years beyond that. Will you have enough money to live comfortably? Here is some advice on how to determine how much money you need for your retirement.

Most people retire at 65. Some, who are fortunate, can technically retire from their jobs earlier than that if they have 30 years invested. They can’t draw their social security if it is too soon, but they can receive their pension if they have one.

Even so, that money probably won’t be enough to last you for twenty odd years, not with the cost of living constantly rising. You may need to do some additional planning.

So how do you determine your retirement needs? First, decide what type of lifestyle you want to live after you retire. Are you planning on being a jet-setting globetrotter? Maybe you want to buy a house at the beach and live out your days in the surf. Or, your dreams could be as simple as being able to take the occasional trip or buy something you want without having to worry about money. All of that plays into the design of your retirement income.

Usually the first line of investing begins at your job. If you are not participating in your company-sponsored retirement plan, then now is a good time to start. Depending on how close you are to retirement age right now, invest as high a percentage of your paycheck as you can in the fund. Usually the maximum is somewhere in the neighborhood of 18 percent.

You also have to decide what type of investment you will make: low risk, medium risk, high risk or a combination of these. This is also dependent on the number of years you still have to invest before retirement becomes a reality.

How much money does it take for you to live now? Calculate your yearly bills and expenses to see how much you spend. That number can be tweaked depending on how you plan on spending your retirement. Now, if you multiply that number by how many years you will potentially be living in retirement, you have a ballpark estimate of the amount of money you will have to save.

If you need more, and most people do, there are other options. Besides your employer retirement plan, you can open your own IRA at your banking institution. Consider an investment portfolio. There are CDs, mutual funds, money market accounts, stocks, bonds, commodities and other vehicles for investing that can bring in income.

Life beyond retirement takes planning. So that you won’t fall short in your finances, start planning and saving now to live comfortably later.