| Home Page | Saving | Budget | Budget Example | Investment | Mutual Funds |

Retirement Planning needs to address two questions: (1) How much will be needed for retirement?, (2) What will be the sources of retirement income?

Usually you'll need 60% to 100% of current income to live comfortably in retirement, provided you're now at a reasonable comfort level.  The percentage varies widely depending on your current situation.  In other words, there are several expenses you may have now that will not be a factor when retirement arrives.  First of all, there are the expenses attributed to children: food, clothes, education, etc..  Secondly, there's your current retirement savings "expense".  Thirdly, there are the debt expenses you may currently have (such as credit cards, student loans, etc.) that should be paid off by the time you retire.  Optionally, if you plan to live in your home during retirement and it's paid for, you'll save on housing costs.

Once you determine your comfortable monthly income for retirement in current dollars (present value), the future value of said amount can be found.  Find the closest five year interval between now and your planned retirement date below, multiply your present value by the decimal number associated with the five year interval (multiplier): the result is about what you'll need per month when retired (future value).

Example: in current dollars, a couple figures they would need $1,500 per month to live comfortably if retired.  They plan to retire in 30 years.  Their calculation is: $1,500 x 2.610 = $3,915 needed per month in 30 years.

For most individuals, there are four basic retirement income sources: Social Security, Pensions, employer tax-deferred savings plans (such as 401k's), and personal savings (including IRA's).

• Social Security - you can obtain a statement from them listing reported earnings for each year worked and providing an estimate of benefits based on when you plan to retire.  To receive the statement you must submit a Social Security Request Form SSA-7004, "Request for Social Security Earnings and Benefit Estimate Statement".  Call them at 1-800-772-1213 to request the Form.  Some suggest obtaining one of these Statements every 5 years to stay current with your benefit.  There's considerable debate over the long-term financial stability of Social Security, "baby boomer's" should expect it to play a minimal role in their retirement.  In other words, it's very likely that future expected benefits will at least be reduced to those not yet retired.

• Pensions - also known as employer-sponsored defined benefit plans, are another possible source of retirement income.  Check with your employee benefits department for any specifics of a plan they provide.  One note of caution: there's no guarantee that a pension plan will still be around when you retire, even if you're currently covered by one.

• Employer-sponsored contributory plans - such as 401(k) or 403(b) plans have become increasingly common.  Basically, they allow employees to invest pretax money in various alternatives.  In addition, many employers match part or all of the employees contribution; in essence, free money.  To estimate the future value of your plan account, use either a financial calculator or an annuity table (the future value of a periodic investment) found in accounting and finance books.  The future value of your account is the sum of the future value of any current balance and the future value of the periodic deposits.  Some spreadsheet programs can also handle these calculations.

• Personal savings - including any IRA's and regular taxable accounts you may have.  The future value of all accounts in this category can be calculated in the same manner as for 401(k)'s, above.