Planning to close the retirement budget gap can relieve anxiety in the future.
Making the decision, finally, to put down the briefcase for good can be wrought with anxiety over whether you have enough money to continue your current lifestyle in retirement. According to the 2010 Retirement Readiness Ratings by the Employee Benefit Research Institute, about 45 percent of Baby Boomers nearing retirement are at risk of running short of funds in retirement. A potential cause of this statistic is the fact that, according to a recent survey by AARP Public Policy Institute, one in four older workers have used their savings during the Great Recession.
Instructions
1. Take stock of the type of retirement you want. If you want to travel for the majority of the next decade you will need more cash than if you plan to stick around the house and work part-time. Sit down and think critically about what you want out of your retirement. When you decide the activities you'd like to participate in, such as travel or taking continuing education classes, estimate as accurately as possible the cost associated with each.
2. Calculate how much money you will need to fund your retirement. This number depends heavily on what you decide you want to do during retirement. Look at your current monthly expenses. Benefits consulting firm Hewitt & Associates suggests multiplying your final salary by 15.7 to reach the nest egg you will need to lead a contented retirement.
3. Assess your sources of retirement income. More than likely, Social Security benefits will not cover all of your retirement needs. An employer's pension, a 401(k) account or an IRA will be needed to fill in the gap. Check the balances in all your accounts and calculate how much you will need to save to reach your goals. There are numerous online retirement calculators you can use see how you are doing. AARP's online calculator takes personal factors, as well as your financial picture, into account.
4. Reduce your spending in retirement -- if you can. Lower your regular monthly bills as much as possible. Pay off your mortgage, or downsize your home. Bridging the retirement gap is not only about making and saving more money. Pay off all the debts you can before leaving work. Adopt green, energy efficient living techniques to reduce utility bills. Take advantage of senior discounts to slash property tax bills. Research places to live that offer a lower cost of living. Every dollar that doesn't go out means another dollar in your pocket.
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