How To Calculate A Retirement Fund
Knowing how to calculate a retirement fund will help you plan for your retirement and give you a sense of security regarding your future. There are no guarantees, but having a good plan for retirement is always preferable to the alternative.
- Don't bet on Social Security. Social Security should always be considered extra income; never factor it into your savings requirements.
- Decide how much you will need annually after retirement. The rule of thumb is 70 percent of your annual income, but many people want to maintain 100 percent of their income into retirement.
- Use online tools. There are a number of websites that will help you with formulas when you calculate a retirement fund.
- Check and double check. Always double check when you calculate a retirement fund. One miscalculation can cause problems years down the road.
- Add twenty percent. Add twenty percent to your projections to provide a cushion for unexpected events, like a major inflation hike. A retirement fund is not a science, and guess work is okay.
- Consider debt. If you have debt when you retire, then your retirement fund will need to have enough income to pay off the debt as well.
- Decide on your retirement lifestyle now. Whether you want to maintain an active lifestyle when you retire or plan to stay home and enjoy the easy life, calculate a retirement fund accordingly.
Leave room in your retirement fund for fun. Not having enough money to go out and have some fun is counterintuitive to having a retirement fund in the first place. Plan to keep your expenses low toward the end of your career and pump extra money into retirement.