Travel is a dream that many retirees have. But, before you begin to think of retirement travel it’s best to get your retirement plan in order..

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.

How many years are there before you retire? This is critical because it is the number of years you have remaining in which to add funds to your financial portfolio. The spreadsheet will take the value of your current portfolio and add to it any expected contributions up to the retirement date. The calculation will show how much you can expect to have at retirement. If this amount is less than what you require, you will either have to add more money to your portfolio, change your investment strategy, or lower you expected standards of living at retirement.

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.

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