Setting Goals for Retirement

Being able to spend lots of time outdoors may be a retirement goal.

Dreaming about working in your garden or sitting on a beach leisurely enjoying retirement is not the solitary method of planning for retirement. Knowing your desires certainly helps in setting goals, but everyone needs to evaluate realistic budgets and lifestyle desires for themselves. Setting retirement goals involves systematic planning similar to how a business plans for the future. Taking the time to set goals and create a plan won't guarantee you the retirement of your dreams, but it will help you get as close to it as possible.

Instructions

1. Paint a picture about your ideal retirement lifestyle. For some, retirement is a time to travel the world, while for others it is a time to golf with friends. Start to identify the things you will want to do, or will need to truly enjoy retirement.

2. Create a list of the activities you hope to do regularly during retirement. Develop a budget for things such as an annual cruise or golf schedule.

3. Examine your existing, non-retired budget for money saving areas. Paying the mortgage off or downsizing a home is a significant money saver.

4. Estimate growth on retirement savings and investments. Assume an average of 4 percent on all investments with $100,000 in assets. Over 10 years, the $100,000 would grow to approximately $148,000 compounding 4 percent annually.

5. Itemize your future monthly budget with living expenses and lifestyle items. Living expenses are the basics of food, housing, utilities, medical and transportation. Lifestyle items include travel, sports, hobbies and other social activities.

6. Add up all long-term savings and investments you have, including time certificates, IRAs, employer-sponsored retirement plans and pension funds. Contact the Social Security Administration to inquire about the benefits you qualify for.

7. Calculate monthly income by taking annual savings earnings and dividing it by 12. Add this amount to pension or Social Security benefits for your total estimated retirement income.

8. Make adjustments to your lifestyle budget projections to reduce costs or start increasing savings immediately. Prevent the risk of outliving assets by using only earnings, never pulling principal savings out to pay for regular expenses.

Tips & Warnings

• Continue to add to retirement savings accounts on a regular basis whenever possible.

• Use tax-sheltered investments such as IRAs and annuities to defer taxes until you take distributions in retirement.

• Be realistic in your goals to make them attainable.

• The formula for compound interest is S= P(1+i)^n with S being savings, P being principal, i being interest and n the number of years.

References

• Kiplinger: Get a Jump On Retirement
• Google Docs: Department of Labor, Savings Fitness
• Money Instructor: Compound Interest
• AARP: Investing for Retirement
• MS Money: Retirment Goals