How to Calculate Retirement Money
You are nearing that age when retirement is lurking around the corner. If you have planned correctly over the last 10 or 20 years, you will be getting money from several different sources as you enter your retirement years and not just Social Security. Here is how to calculate your retirement money.
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Instructions
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Understand that when you retire you will need approximately 70 percent of your current earnings to continue to live the lifestyle that you have grown accustomed to. Therefore, plan ahead.
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Request a balance from your IRA or 401K holder. Call your provider and request a recap at least 1 year prior to your retirement date. Depending on your age at retirement, you can request that the funds contained in your IRA or 401K be disbursed as a lump sum or you can request a monthly or annual annuity to be provided to you. You have to discuss this procedure with your bank before choosing which path to follow. If you choose to take an early withdrawal before the age of 59 1/2, you must pay a 10 percent tax on early distributions or withdrawals.
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Contact the Social Security Administration (see Resources below) for a free Personal Earnings and Benefits Estimate Statement.
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Your Social Security benefits are about 40 percent of your pre-retirement earnings. You can retire at any time between age 62 and full retirement age. However, if you start benefits early, your benefits will be reduced a fraction of a percent for each month before your full retirement age. If you were born between 1943 and 1954 and you request SS benefits early, and if you start receiving retirement benefits at age 62, you will get 75 percent of the monthly benefit. If you choose to wait until your full retirement age of 66 (in this example, for those born between 1943 and 1954), you will not be penalized for continuing to work.
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Contact your employer and have your human resource office produce a retirement calculation for you. The amount of money that you will be receiving from your employer is based upon the number of years that you have worked for that employer and the amount of money that you earned during your time with that employer. You will be getting a percentage of your current pay based on the requirements of your company.
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Understand that you still have to pay taxes on your pension if you are under the full retirement age. For example, your human resource office calculates your monthly annuity at $5,000 per month, you must take into consideration that you will have to deduct from the gross amount of $5,000 approximately 15 percent for Federal Taxes, 7 percent for state taxes and another 2 percent for Medicare. So your Gross benefit will be reduced from $5,000 to a net amount of $3,800.
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Tips & Warnings
Plan ahead; pay off as many debts as possible before you set a retirement date.
Without careful planning, you may have to find a part-time job to make ends meet. You may be eligible for an early release of Social Security benefits at age 62. However, you must remember that there are limitations set on the amount of money that you can earn during a year while collecting Social Security.
