There are levels of preparedness when it comes to looking down the road at your retirement and how much you will need when you get there. The basic level of retirement planning is to enroll for your 401k at work, support legislation to keep Social Security untouched, buy some life assurance and let it go at that. This system will work so there is reason to call this bad retirement planning. Of course , if you began preparing for retirement in your early adult life and stayed with it, you will have a resource to retire on and that is a nice thing.
But there is a method to take it to a higher level and that is to actually start putting some flesh and bones on your vision of your retirement and get a feel not only for the incontrovertible fact that you may retire but how you plan to live in retirement. Fairly often, we have idealistic visions of retirement life based totally on media pictures or the fantasy life of living in luxury and having very little to do but golf in the morning and drink campaign and eat caviar all afternoon. So if you can get a realistic view of what you have as your expectations for retirement, you can begin to make changes to your retirement planning package right now.
Begin with how you see your retirement way of living working. If you want little more than a manageable retirement studio, a cat and the chance to knit or watch HBO with no interruption, that could be a fairly modest retirement lifestyle to make preparations for. But other folks have adventure and high living in their retirement dreams. So if world travel or living in a luxury setting is part of that dream, only one person is going to make that dream come true and that is you.
An exercise that’s fun and eye opening is to detail every aspect of your dream life in retirement. Start by picturing your environment. Include your diet needs as well as any entertainment and recreational needs you expect to be a part of retirement. For instance, if you know that you will want to go on long fishing adventures 1 or 2 times each year, you will need a RV and the finances to support taking off for the most picturesque spots within driving distance to kick back and revel in the fishing. So include the physical and finance needs for that lifestyle in this “detail” step of retirement planning.
You can complete the exercise by getting to such an amount of detail that you could go out and price the dream in the current day’s greenbacks. Then when you take your “dream retirement shopping list” out into the open markets and use retail locations, catalogues and Internet sites to discover how much it would cost to have that retirement today, that might shed lots of light on your retirement preparations you’re doing.
Now, the price of those different components will be far higher when you really get to the point of retirement. You could try to factor in inflation and make those kinds of adjustments but do not play with the formula so much that you get it that it is impossible and give up . Nevertheless another factor that offsets the inflation factor is that your retirement life will be more cost effective then your current lifestyle .
Your daily wants might not be as demanding. If you sell your home after clearing the mortgage, your monthly costs will go way down and you will have a major surge of retirement capital which will come from the sale of the house. And you aren’t raising youngsters, putting them through university or having to support the approach to life and wardrobe of a working person. All these things offset the inflation issue.
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