Am I on Track to Retire?

While there is no way to guarantee that you will retire on time, there are some strategies you can try to make the process go a little smoother. One of these strategies is to periodically review your plans and evaluate your chances of success. Taking this step every year will help you keep on track and catch mistakes sooner. Taking an asset inventory will help you compare your assets to your current income and identify whether or not you are on track to retire.

To calculate your savings, make a list of all of your current expenses and income sources. You may not need to change your income in retirement if you have a mortgage, so figuring out how much you need to save each month will help you plan the right amount of money to retire. After this, you can then subtract your current savings from your total goal. Make sure to estimate your current income and subtract any payments from it to see how much you need to save.

Identifying your assets is one of the first steps in planning for your retirement. Many people have multiple accounts, particularly married couples. It is important to gather all your accounts and make sure they are all contributing to the same retirement savings plan. Then, separate them by type. For instance, if you own a home, you should set aside the equity in it to save for retirement. This way, you can ensure that you can enjoy a comfortable retirement.

Identifying your alternative sources of income is also an important part of retirement planning. In addition to Social Security, pensions, annuities, and rental income are all sources of retirement income. You should plan for these sources of income as well, as they may fluctuate over time. Consider these different scenarios and find solutions for any gaps. Make a list of your current balances, as well as their percentages.

As your career blossoms, your retirement savings should increase. If your employer offers a 401(k) plan, consider increasing the deferral from your paycheck. If you are self-employed, set up a SEP or SIMPLE IRA. A 1% annual contribution will add up to tens of thousands of dollars over the course of your career. This amount is very important for saving for retirement.

Before you begin saving for retirement, ask yourself these questions: What is my ideal lifestyle after I retire? Do I want to travel, eat out, and go to the movies? Will I move closer to my grandchildren? Consider all these factors when planning for your retirement. Putting these factors together will help you determine how much money you need to live comfortably. You should also consider your lifestyle expectations and the cost of living in retirement.

How much should I invest to reach my goal? If you earn a $100,000 income today, you'll need about $1 million in savings after you retire. You need to invest at least four percent of that amount in a non-tax-advantaged savings plan. After age 72, you must begin withdrawing required minimum distributions. This is known as the "4% rule," and is a subject of debate in the financial planning community.