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Funding retirement can be a daunting prospect if you’re used to that cash-cow salary from your current job. So as part
of your retirement planning, it’s important to look at what you expect your retirement to cost you and how you plan
to fund it!
How much do you need to retire?
You may have heard the magical $1,000,000 that’s
needed to fund retirement, but how much money you actually need to see through your retirement depends on a number of things:
- When you plan to retire – if you’re planning an early retirement, then you’ll need more money to
fund your retirement.
- How long do you expect to live – how’s your health, what’s the longevity of
your parents?
- What are your Retirement Goals and what is this lifestyle going to cost you?
- Do you own your own home or will you need to rent housing throughout
your retirement?
- Are you supporting your kids or grandkids?
So think about what you may want to do when
you retire – are you going to travel the world, or will you be just as happy sitting at home knitting? Your retirement
plans will have a significant impact on how much money you’ll need, but typically people will need to have saved 10
times their current income to live in the same level of comfort.
It also helps to do a budget (in today’s
dollars) for the life-style you anticipate for your retirement – include living costs (food, utilities, rent, etc),
travel costs, entertainment, health costs and gifts (for all those grand kiddies). How much does this add up to for a year?
Armed with this budget information, see a financial advisor to discuss your funding options – and whether it’s
possible! Here’s a great Retirement Simulator that may help work out how much you need for your retirement.
Funding Retirement
It’s
important that you investigate all the options for funding your retirement. Sources of income include: - Pensions and
Government Allowances if you’re eligible
- Superannuation
- Dividends from investments and mutual funds
- Income
from part time work or ‘retirement’ business ventures
From all these sources, estimate how much money
you’ll received every year. How does this compare with how much you need to fund your preferred retirement lifestyle?
The important thing with retirement planning is to start early and get professional advice.
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