Navigating Retirement Planning Tools

The best way to plan for retirement is to start now. Planning ahead using the right retirement planning tools will ensure that you are prepared for the future. Figuring out a suitable retirement plan includes assessing your future needs based on current or expected factors such as marital status, dependents, mortgages and loans, lifestyle and other regular expenses. This is the second part of a two part series on planning ahead.

How Much to Save for Retirement

The reason behind using retirement planning tools is to help people determine how much they should save for retirement. Unfortunately, it’s almost impossible to come up with an exact figure, but with careful consideration you can come up with a realistic figure. Your should be focused on determining how long you will spend in retirement and how much money you will need for each year.

At minimum, you should be looking to spend upwards of twenty-five years in retirement and even longer if you retire before the age of sixty-five. This means that you should have at least twenty-five years’ worth of funds to survive on. And, given the increasing life span of Barbadians, retirement could be extended up to forty years and more.

Deciding exactly how much money you will need might be difficult. However, if you consider your current commitments and quality of life you might be able to come up with a reasonable figure. When thinking about this figure, also include costs for additional medical and anticipatory care as well as funds for travel, housing costs and other retirement activities.

Retirement Income

When planning your retirement income, the goal is to have enough money to last you throughout your retirement. If you have determined how much you will need to save for retirement, your next step should be to decide what your income will be like after you retire. Most people will receive a pension from the government, but this might not be enough to survive on. Now is the time to research retirement savings plans, pension funds and investment plans.

If you have not thought about retirement planning, your task right now is to get your finances under control. Take a look at your assets and see how much they are worth. Also, look at your liabilities and determine when you will pay them off. If you have a mortgage, this will impact how much money you will need for retirement.

The best course of action is to create a long-term financial plan that will enable you to live comfortably during retirement. Your financial plan may include cutting back on some of the non-essentials, managing your spending, contributing to a retirement plan or even paying off some of your debts ahead of time.

Care Planning

When one thinks of retirement, there is always some concern about additional care that may be required as one ages. Medical care and anticipatory care are two types of care which may figure greatly when planning for retirement. Although no one can predict the lengths to which each type of care may be required, estimated costs must be included in any plans for the future.

Medical care is an expected expense for retirees. If you will not be taking advantage of the state provided medical services, you will have to pay for these services out of pocket. Some medical insurance plans may be available for retirees, but the prices may be higher with greater plan restrictions. Medical care for seniors can be expensive and more frequent visits to medical professionals  may be required

Anticipatory care planning refers to when decisions about your care are made in advance, based on changes in your condition. This includes planning for an advanced stay in a hospice, elderly care or nursing home, or enlisting the services of trained, specialist professionals to provide home care.

Estate Planning

Deciding who will be in charge of your estate if you become incapacitated is an important aspect of retirement planning. You should think about creating instructions which declare powers of attorney for trusted people to make decisions on your behalf. Creating wills is a key aspect of estate planning and allows you to distribute your estate.

An extension of estate planning is end of life care. This involves making decisions about your wishes for the last days of your life. This is a difficult topic and no one ever wants to have this particular conversation. However, it is should be done with the input of family and medical care professionals.

Retirement Planning Tools

There are several retirement planning tools which provide estimates on your needs for retirement. However, you should decide which calculator best suits your needs. Recent criticism has noted that many retirement calculators available online are geared towards selling you a product. But, financial advisors may have the same agenda.

According to a study conducted by collaborating professors from Texas Tech and Utah Valley universities, the following variables should be included in online retirement planning tools:

Age

Questions about age should include your current age, your expected retirement age, life expectancy which is determined by personal health habits, whether you are a smoker or non-smoker and your family’s mortality history.

Income and Expenses

Your current income is important as well as your expenses. Retirement income includes pension, social security, trust income, disability benefits and other sources of retirement income. Retirement living expenses are also included.

Assets and Debts

Assets and debts include accumulated savings and debts which are taxable, tax-deferred, tax-free and mortgage details; windfall receipts and bequests.

Rates

Future return assumptions such as stocks and bonds, inflation assumptions and tax assumptions should be considered.

Household Structure

The country of residence, location in the country, gender, marital status, specific goals and risk tolerance are important variables as well.

How to Prepare For Retirement

When preparing for retirement, there are a few things to remember. Perhaps the most important one is that you should start saving now and make it a regular habit. Another tip is to contribute to your company’s pension plan or start your own retirement savings plan. Although you may be tempted, you must show restraint and not withdraw the funds that you are saving for retirement.

If you need more information, simply ask a question. Choose a couple of the financial institutions that offer retirement products and get some advice. Many of them will try to sell you their products, but you are not obligated to purchase anything.

How did you find the Retirement Planning Tools that were suggested? Take a look the Consumer Insurance Guide, another feature in the Planning Ahead series.

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