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Retirement Planning

What Will You Need In Retirement?

Here's a fact: the basic cost of the average American family's lifestyle is about $4,000 a month. That's the price for basic necessities including mortgage, food, insurance, electricity, taxes, and such.

Most people have not calculated what retirement will cost and think more about what they'll do when they retire than how they'll save the money it'll take to make those plans a reality. While it's important to know what you're saving for, it's equally important to know what that might cost. After all, you positively don't want to reach retirement only to find that your savings can't fund your expenses.

Are You Saving Too Much? The only way to answer this question is with a clear figure of what you'll need in retirement. Knowing that, everything else will fall into place because then you can calculate what you should be saving now to achieve the level you need or want for the future.

What Are Your Basic Living Costs In Retirement? Do you really know what life will cost in 20, 30 or more years? Or how long you'll live in retirement? Some plan for 10 and live for 20 ... or plan for 20 and get 2. Additionally, health-care bills may be higher by then, or you may want to eat out every night.

It's up to the individual to calculate those expenses, figuring out what kind of lifestyle he'll want to live - and then saving above and beyond his basic expenses.

So Where Do You Stand?

Based on your calculations of your needs and what you've already saved up and, assuming a conservative growth rate, will your savings be large enough to cover the income gap you face? There is no guarantee that your job or your partner's job will continue until you hit a ripe old age, or that Social Security will provide what you expect. You'd probably rather save what you can while you can in the event that you're unable to save as much as you need to later. If you wind up being over prepared, well, that beats being unprepared any day.

Even factoring in a desirable lifestyle, some people do save more than is ultimately necessary. While that really isn't a problem, there's something to be said for improving the quality of life today by scaling back on retirement savings. While that probably won't mean a late model car with no lasting value, it may mean something like a swimming pool which would promote a better quality of life. Knowing that such a purchase won't ruin your future, you'll have the confidence to live a little more in the present.

Next: Financial Planning
Planning for Retirement 1
Planning for Retirement 2
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