How to Budget Retirement Planning
Whether retirement is right around the corner or decades away, proper planning will help you save the right amount of money to live comfortably in your retirement years. Creating a budget for retirement refers to the amount of money you anticipate needing in retirement. Understanding this number helps you look at ways to plan existing budgets to maximize savings and earnings. While there are no guarantees that investments will perform to expectations, proper planning will get you closer to your goals.
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Instructions
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List your current expenses, including mortgage, car, property tax, health care and living expenses. Copy this list, removing the items that will be reduced or eliminated in retirement. For example, your house may be paid off or you will spend less on commuting.
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Call the Social Security Administration at 800-772-1213 to get an idea about what your Social Security benefits will be in retirement. Most of the work force should expect about 40 percent of preretirement earnings in benefits.
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Add up the money you have in retirement savings plans through your employers, IRAs and supplemental annuities. These funds grow tax-deferred, reducing the annual tax bill you owe until the money is taken out in retirement.
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Check a retirement calculator, such as the one at CNN Money or Bank Rate, that uses your age, retirement savings and desired retirement income to find out how much you need to save or what interest rate you need to get in order to achieve your income goals.
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Go back and review your existing budget. See whether there are any items you can cut or reduce so you can add more to retirement accounts or general savings if your retirement accounts are maxed out. The 2010 IRS regulations allow you to save $16,500 in a 401k, $5,000 in an IRA and $19,500 in a 403b annually, depending on which accounts you qualify for (consult a tax adviser about qualifications).
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Tips & Warnings
Most financial advisers recommend a diversified portfolio to obtain growth over time for retirement assets. Those under the age of 40 should have at least 80 percent of their retirement assets in stocks or stock funds. As you approach retirement, your portfolio should have fewer assets in stocks and more in fixed income sources to protect your savings.
