I’m not knocking “here and now” living. We should enjoy life, but that notion alone is not good retirement planning. Eventually, the future becomes now, and that’s when you will wish you had planned for it. Let’s face it—starting a savings plan just before retirement doesn’t make a lot of practical sense. You can live in the here and now, but you still need to make adequate preparations for the future.
Our parents didn’t have to plan for retirement, but we do. We have to get out the map and chart our course.
Sometimes, people without a clear picture of their retirement needs and funding ask me how to begin. The first step is to gather information about how much you are currently spending on a monthly basis. Look at what expenses may go up after you retire and which may go down. This exercise will give you an idea of how much money you will need in retirement. Then take a look at what income you can expect, and from which sources: Social Security, your 401(k), your pension plan if you have one.
If you are comfortable with spreadsheets and financial calculations, you can use this information to calculate how much you will have at retirement, and how long it will last (be sure to factor in inflation). If you are not conversant with financial calculations or are intimidated by all this, take the above information to a Certified Financial Planner™ professional and have him or her do the calculations for you.
No matter what the numbers tell you, you’ll be glad you took the first step. The numbers will tell you what you need to do, whether it is to increase the amount you are currently contributing or to reassess your projected retirement age or desired income level. You might even be pleasantly surprised to discover you’re right on track.
The first step is always the most important. By taking it, you will have stopped putting off retirement planning for later. Regardless of how old you are, sit down and take an honest look at your retirement planning. If you’ve waited a long time, the reality may be jarring—but less so now than it will be next year or the year after.
Get started now. No one else will do it for you.