How to Determine Projected Retirement Income
You have worked hard all your life and you are looking forward to retirement. No more alarm clocks, dull meetings or power lunches. Regardless of how far away your retirement date is, you will need to know how much money you can expect to have available. It's good to know whether you can take that round-the-world cruise or if you will be looking for a part-time job to make ends meet. Do not bury your head in the sand. Calculate your retirement income now, so you can make realistic plans for your future.
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Things You'll Need
- Calculator or spreadsheet software Financial statements Bank statements
Instructions
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Evaluate your Social Security payments at age 62, 65 and later. You can find out how much you will receive from Social Security by visiting My Money, a federal government Web site. Unless you have worked as a teacher for a state or local education agency whose payroll deductions supersedes Social Security, this income is guaranteed from payments that your employers have deducted from your payroll. Many school systems make deductions from teachers' salaries that replace Social Security. Contact your benefits manager or human resources department to get estimates of your monthly income.
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Use the downloadable CD on the Social Security Web site to review your mandatory Medicare costs. These payments are automatically deducted from any Social Security before you actually receive payments. This means that your Social Security income will be decrease at age 65 when you enroll in Medicare.
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Add company pensions if applicable. Inquire about incentives for early retirement. Some companies give employees lump-sum payments that make early retirement attractive. You may find it to your advantage to take a buyout at an earlier age than you originally planned. Be sure to check the minimum and maximum ages if you are considering this type of offer.
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Calculate the value of your assets. This should include the equity in your current home, vacation property that you own, vehicles, savings accounts, certificates of deposits and other investments like stocks and bonds. Since this is an estimate, be conservative about the future value of your investment earnings.
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Consult your financial adviser or your bank about your IRAs if you have them. Get estimates of your distribution of payments by age. In most cases, the older you are when you retire and start withdrawals, the larger your monthly payments.
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Use the Department of Labor's retirement planning worksheets to estimate your payments from all personal assets, including potential income from reverse mortgages. If your liquid assets have different dates of maturity, list them in order that they become available.
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Create several scenarios based on different retirement ages. Consider post-retirement income from a small business or part-time employment. These option can help you stretch your payments from other fixed-income sources so they last longer.
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Tips & Warnings
If you are 50 or older, you may qualify for tax-deferred catch up contributions to an IRA, if you discover that your retirement income falls short of your estimated needs. Remember that some investments have mandatory withdrawals after age 70.
