Planning for retirement can be boiled down to 2 part simple equation: it is all about managing income (inflows) during your working or earning days and managing expenses (outflows) during your retirement days. Different people will have different opinion regarding retirement, that’s natural. But rather than a static state, retirement is a dynamical state, changing with life events, financial events, and even your own education as you learn more about concepts and products.
The more information you absorb, the more comfortable you feel in being an active player and participant in the planning for retirement. Your plan for accumulating assets for retirement has to take all of this into account and be elastic enough to adapt to all kinds of changes.
Your mental confusion regarding retirement planning is compounded by the simple fact that retirement is not left up entirely to our own devices. If you are working with a company, your company should provide you a corporate planning for retirement plans. Then you also have individual saving for retirement plans. Social Security is one thing that all must be factored in into our goals for achieving financial independency.
The good news is that much of this can be measured, meaning we can quantify our ability to achieve any goal we set. What we can’t easily measure is the qualitative issues that drive you to saving for retirement and your ability to save for those retirement goals. The qualitative issues are the more emotional issues driving conclusions both pre-and post retirement.
Common Saving for Retirement Mistake
Most people make some underestimation regarding the total income they need to live on post retirement. Activities like sports and golf can be very expensive, even with senior citizen discounts. And you need to realize that in retirement, you’ll have more time on your hands, which means more time for projects and hobbies that cost money. So it is better if you could make a sound and proper saving for retirement as earlier as you can.
Sometimes, you’ll need to ask yourself questions like how many vacations you want to take each year during and post retirement. You know that even retired people take trips, vacations, or other diversions. How often will you go to the movies, how many awards and presents will you buy for the kids, and what impact will all this have on your ability to ensure that you have enough money on which to retire? Will you take up any new and costly hobbies that will have to be accounted for in your post retirement budget? You’ll also find yourself grappling with tradeoff that may expect you to postpone the immediate gratification associated with an act today so that you can afford to define your own terms for retirement and post retirement.
At this point, it might be a good idea for you to keep a pad of paper handy for your notes and thoughts. You need to begin to determine just what retirement will look like for you. What would a typical day, week, or month offer? This is how you can begin to frame out the amount of money needed to fund your retirement and make a proper saving for retirement. If it helps you to think in socio-economic conditions instead of absolute dollars, go ahead and define your planning for retirement by the number of cruises you want to take each year, the number of times you want to play golf each week, and the number of times you’ll eat out during a given week. Someone can always convert those to absolute dollars for the purpose of projecting your income needs.
In the above circumstances, it is better if you wait a while and take some time to contemplate on these questions? If you have a spouse or significant other, get together with that person and talk about how you want your retirement to look and feel and how the steps you took for planning for retirement. Brainstorms some ideas and make lists; you’ll be much better prepared to read the balance of this chapter if you have begun the process of better understanding your retirement needs and to avoid saving for retirement mistake.©
