Do you know how much income you can expect from Social Security in retirement -- or from any pension plan you have? Do you know how much you need to save to make up for any shortfall in your desired retirement income?
If you answered "no" to the questions above, then it may be time for a retirement check-up. And the earlier you start planning for retirement, the better off you'll be when that time comes.
First, gather your information.
Include any traditional pension or other retirement plans you have. Request a benefit summary plan, including when and how you'll receive your payments. For an estimate of your future Social Security benefit, watch your mail for the annual statement now sent automatically (around your birth date) to all workers age 25 and older. Or, you can use the Social Security Administration's online Retirement Estimator
Then, estimate your retirement expenses.
In general, you'll need about 70% to 80% of pre-retirement expenses. But these traditional formulas may leave you short -- due to longer life expectancies, active retirement lifestyles, higher medical expenses, long-term-care costs, and higher property taxes.
You'll do better to overestimate how much income you'll need, to allow for unexpected spending. You should also factor in annual cost-of-living increases between now and the time you retire, as well as throughout your retirement.
Finally, put it all together.
A financial adviser, retirement planning software, or Internet calculator can help you calculate how much you need to save to make up any shortfall in your desired retirement income. Remember that even the best advisers and software can provide only an estimate
of your needs. Your results will change based on actual investment returns, inflation rates, tax law changes, changes in Social Security, and how long you live, among other things.
Use Coosa Pines FCU's free Plan It: Retire Ready Toolkit to start planning, or continue planning, for your retirement. Plan It offers interactive tools, calculators, audio clips and informative articles, as well as quick tips on subjects from growing your nest egg to facing family challenges, and managing legal issues to insuring against loss.