Finance Desk, Delhi Magazine: It can be hard to predict the future accurately, but you need to make plans for it. Remember that planning for the future can involve having retirement goals and saving money. You need to determine the amount of money you desire to have to live comfortably when you stop working.
The best way you can figure out the amount of savings is to use a retirement savings calculator. And, once you are aware of the amount of funds you must set aside, you can know the amount of money you need to save monthly during your working years. Utilizing a retirement savings calculator also allows you to see whether you are on track or where you have to make adjustments to assist you to reach your financial goals. This article discusses everything you need to know about a retirement savings calculator.
Understanding a retirement savings calculator
A retirement savings calculator is a great financial planning tool that you can use to see the amount of money you may end up with during retirement, but this depends on how much money you save monthly. You can also use a retirement savings calculator to identify the changes you need to make to your spending and saving plans based on your age and the age at which you want to retire.
No doubt, a retirement savings calculator is a useful tool, though it’s underutilized. Some studies by the Department of Labor indicated that less than half of Americans usually already figure out the amount of money they may need when they retire. You need to use a retirement savings calculator so that you can know if your plans are on track or if you have to make some adjustments to make sure that you can live a comfortable life when you retire.
Retirement savings calculators usually make a couple of assumptions when it comes to determining the amount of money you need to save. They can assume that inflation may increase by a certain percentage, based on historical averages. They can also assume that your income may increase each year, but this depends on the cost-of-living wage increase. Also, they may consider a certain rate of return before your retirement and a lower return after your retirement.
Quite often, you can decide to make some adjustments to the figures in the retirement savings calculator so that you can match your situation. For example, you can adjust the estimated rate of return or even change the interest rate so that you can see how earning a lower or higher rate of return can affect the amount of money you have to save. Also, you can adjust your retirement age to figure out how delaying your retirement or early retirement changes your saving goals.
When you plug the numbers into a retirement savings calculator and get a result, you can have a good idea of the changes you need to make. You can adjust your savings plan so that you may have the estimated final value in your account once you are ready to quit working.
The exact amount of money you must save to live a comfortable life during your retirement can depend on several factors. One of them is the length of time you expect to live when you retire. Keep in mind that an average person can live between 18 and 20 years after retirement, though some individuals tend to live quite longer. You need to have more savings if you expect to live longer after retiring. Another factor that can influence the amount of money you should have after retiring is your income and spending needs. Most retirees often find that they have to spend between 70 and 90 percent of their income so that they can keep up with their living standards once they quite working.
Your retirement needs
There are several things you should consider when calculating your needs in retirement. You need to consider your housing costs in retirement. When you retire, you may spend less money on housing than you presently do, but this depends on your situation. If you purchase a home when you are 30 years old with a 30-year mortgage and make the agreed payments each month for the whole term, then you can pay off your house at the age of 60 years old. With this, you can have a mortgage-free retirement.
But you still need to pay property taxes and other costs associated with home ownership like upkeep, though the monthly expenses tend to be lower. And, you should also consider whether you plan to go to an older adult community or want to move to an assisted living facility.
You should also consider your medical costs. Perhaps, this is one area that increases significantly as a person gets older. There is a chance that you can develop a chronic medical condition or even may require expensive medical treatment. The good thing is that you can estimate your expenditure on healthcare during retirement.
You need to check your typical costs related to some of the common chronic conditions like heart disease and diabetes so that you can have a good idea of the future medical expenses. You should note that Medicare may pay some of the medical expenses as well as supplemental health insurance to fill in any coverage gaps.
Another thing you should consider while estimating is the amount of money you may need during retirement is what you expect to do when you quit working. You can choose to travel across the globe, explore new places, or even visit distant friends and family members. Alternatively, you can spend most of your time on the golf course or simply read books. Take note that traveling or participating in more leisure activities usually affects your living expenses.
You may also have to depend on your retirement savings alone when you quit working full-time. You can have Social Security income that you can use to supplement the cash you saved. Also, you can choose to work on a part-time basis so that you can receive income from paid work.