If you want to know the right time for retirement then you have to do some personal calculations, you should also know the time when you will be getting retired or have decided to take retirement and also analyze your weekly or monthly spend after your retirement.
Most of the people come across the time when they fail to decide the exact time of their retirement and later feel sorry for themselves. Are you also in the same situation and thinking about the right time for your retirement and must be feeling do you have enough to get retired?
So, to get the bright idea you should go through the simple steps given below, and you will know precisely whether it is a correct to me for you or not for taking retirement.
Analyzing Your Retirement With Five Step Calculations
The following steps given below will help you to decide when is the time for taking retirement and do you have enough resources and savings for your after retirement spending.
1. What will be your total yearly saving which will help your post-retirement expenditures?
2. When you evaluated your annual savings, then multiply that number by the number of years left for your retirement or the time when you have planned to take retirement.
3. When you have calculated that number, then you add it to your current savings.
4. Then analyze how many years you are expected to live after your retirement and divide it by the number of years you are assumed to live.
5. If you have got other income sources, on which you can rely on then add that number to those income sources.
When you have done all the above calculation, then compare with your annual expenses which you're doing currently, and you can analyze the amount which you have calculated is handsome enough to cover all the costs yours for the number of years you are likely to live.
Example Below Will Make You Understand The Your Retirement Calculation is Enough or Not
So let's begin with five-step retirement calculation mentioned above with some simple example as provided below:
1. Let the couple age be 50 years.
2. Each of them contributes some of their income in their IRA, and the total contribution is 12,000 USD, means each of them is providing about 6000 USD.
3. The couple has saved about 130000 USD currently.
4. The couple have decided to take retirement after completing their whole work tenure, that means they have decided to take retirement at the age of 66 years and two months, this age is also defined by Social Security as the retirement age, so let's say they have decided to take retirement at the age of 67 years.
5. As per the life expectancy calculations, they have found out that one of them will have the lifespan of about 90 years, so they can easily expect about 23 years of post-retirement life.
6. He will have about 2000 USD per month (24000 USD per year) in his social security account, and wife will collect half of this amount as a spousal benefit, which will be 12,000 USD.
Using this sample data let's figure out whether they have enough to retire or not.
1. 12,000 USD is their total yearly contributions to retirement savings.
2. 12,000 multiplied by 17 = 2,04000 USD, which is their total yearly saving multiplied by the total number of their working years left.
3. 2,04000 USD added to their current saving, which is 1,30000 USD so that the total amount will be - 3,34000 USD.
4. 3,34000 USD divided by number of years they can expect to live, i.e., 3,34000/23 = 14521 USD
5. (14521 + 24000 + 12000)= 50521 USD, which is annual expected retirement income added to other sources of reliable income, and in this case, Social Security is their guaranteed income.
When we have evaluated the sample case study, and the total retirement income is being calculated as 50521 USD. So, what is required now is that couple need to analyze what are their current yearly expenses and spending and if they find it satisfied when comparing it with their current yearly expenses they can surely have good post-retirement life regarding expenses.
However while doing the calculation about post-retirement expenses, some things may go up and down such as health care, transportation, and other utilities.
Things Which Are Not Going With Above Mentioned Retirement Calculations
Some people will surely won't think that the above retirement calculation can't be advisable or generalized because of many loopholes as the calculation have not take into account of growth rate on investments, inflation rate, and many other volatile things.
If we assume that - 'the growth rate is about 2%, and the inflation rate is again 2%' then obviously these two variables will cancel out each other.
The main point here is that it was impossible to exactly predict all of the circumstances and situations which will exactly affect your retirement plan as it is dependent upon many other external factors. So, always be careful while planning out retirement and do the detailed planning and calculations.
In Case You Don't have Enough While Calculating Retirement Plans
Some so many people don't want to do any calculation for their retirement or even don't have plans for their retirement as they are afraid of the answer that will come out.
But in this way they are very unfair to themselves, so don't have an ostrich approach and face reality and do some calculations for your retirements, it will help you out surely and is always better than to plan for the retirement, and soon you realize that things are coming up short.
In case you have done the calculations as mentioned above and you found out that the things are not coming your way as expected than the first thing you should focus on to increase your income and start working a bit longer.
You can also start finding many other ways to generate extra revenue; you should also work and plan out to reduce your expenses. All these steps and actions will surely make your post-retirement life better.