Project a better retirement with
only 4 or 5 years to go?
By Shane Flait © 2008
Knowing what your retirement income
and expense is essential to planning
your retirement life. You can
estimate your income and expenses
under your present circumstance. If
you’re not happy with the results,
take some quick steps to fashion a
better retirement. Here’s the
process:
Income determination:
Your base retirement income is made
up of three parts:
·
your pension income,
·
your social security income, and
·
the income your savings will
generate.
Check with your company for your
pension income estimate. Estimate
your social security income using
www.ssa.gov. Project your total
savings 5 years hence, then take 5%
of that estimate what income it’ll
give you. Now total these for your
annual retirement income.
As an example, Bill’s pension gives
an annual income of $12,000; his
social security - $13,000 and his
savings - $12,500 ((= 5% of
$250,000) for an estimated total
retirement income of $37,000.
Expense determination
Add the total of your annual
expenses as you incur them now. Your
necessary living expenses are:
·
Housing (rent, RE taxes, mortgage),
·
utilities (tel., electricity, gas,
oil),
·
transportation (insurance, gas,
repair, replacement),
·
clothing and
·
taxes(10% of income).
Now add optional annual expenses
for:
·
entertainment (dinners, movies,
pocket change, etc) and
·
travel.
Total your all your income and then
all your expenses. Compare your
total income and expenses. You can
see now where you come up short or
not.
An example:
Bill has necessary annual expenses
are $5,000(housing), $4,200
(utilities), $5,600
(transportation), and $3,700 (taxes)
for a total necessary living expense
of $18,500. He estimates his
entertainment expenses at $16,000
(about $40/day). He’d like to see
how much would be available for
travel.
First, Bill totals his income to
$37,000. From that he subtracts his
necessary living expenses plus
entertainment expenses are $34,500.
This leaves about $2,500 for travel.
With this estimate, you – and Bill -
can see how tight or loose
retirement will be. If your
retirement circumstance is
unsatisfactory, then you can choose
to enhance your retirement income by
-
Saving
drastically more for the next
few years to enhance your assets
-
Work
part-time during some of your
retirement
And/or you can diminish your
retirement expense by
-
Decide what
to are unnecessary expenses
-
Move to where
living expenses are less
Determining how to modify your
retirement can be just a matter of
determining how much more you can
reasonably save for retirement. Or,
it may put you on a track to
redesign your retired life into a
new life style in a whole new place
that suits your budget and your
happiness.
Bill found that selling his house
and buying another in a cheaper
country to enhance his savings and
drastically reduced his expenses –
see table. Selling his house freed
up about $50,000 in equity. This
produce another $2,500 (=5% x
$50,000) of annual income from
savings. His living expenses dropped
by $5,000 too by moving. Look how
these changes modified his income
and expenses in retirement. He now
has plenty of money to do some
traveling. What about you?
|
Retirement Income |
|
|
pension |
Soc. Sec. |
savings |
PT work |
total |
|
Current |
$ 12,000 |
$ 13,000 |
$ 12,500 |
$ - |
$ 37,500 |
|
Modified |
$ 12,000 |
$ 13,000 |
$ 15,000 |
$ - |
$ 40,000 |
|
Retirement Expense |
|
|
necessary |
entertainment |
travel |
|
total |
|
Current |
$ 18,500 |
$ 16,000 |
$ 3,000 |
|
$ 37,500 |
|
Modified |
$ 13,500 |
$ 16,000 |
$ 10,500 |
|
$ 40,000 |
Shane
Flait is a writer and educator. See
more at
www.EasyRetirementKnowHow.com
