expenses, putting a savings plan into effect, and management of assets. The cash flows that you will have in the future will then enable you to judge the feasibility of your retirement income goal.
Why Do You Need a Retirement Budget?
What is most challenging about retirement spending is that most people don't have much else coming in, but savings. Social Security, yes, but Social Security only can only go so far in itself. If you intend to travel, Social Security alone might not cut it. To help prevent overdraws, you can plan a budget for yourself. Your budget will tell you how to spend during retirement.
Some people don't like to say the word "budget" because they feel that budgeting has a negative connotation, making it sound as though you are depriving yourself of the things you want. That's just not true. A budget is not about depriving yourself but rather ensuring you will have enough funds to spend money when you want something in retirement.
Retirement planning: the step-by-step approach:
No matter what age in your life you are or will be when you retire, there are some general steps applicable to nearly anyone. Some of the most common ones are the following:
Steps:
• Plan: That is, determine when you want to begin saving when you want to retire, and how much you'd like to save for your final goal.
• Determine how much you would like to put aside each month. Automatic deductions eliminate any guesswork and keep you focused on your goal, removing the possibility of stopping or forgetting to deposit money yourself.
• Pick good accounts for yourself. Use a 401(k) or similar plan that your employer offers. If the company does offer some kind of employer match, you are essentially giving away free money if you don't take advantage of that. Even with an employer match or without it, you are getting a pretty good deal tax-wise.
• Periodically review your investments and rebalance them. This is especially needed after some significant event such as marriage or the birth of a child.