The major goal behind working hard every day and earning is to ensure that we have a comfortable lifestyle while working and as well as after our retirement. Usually in the beginning of the career most of us are focused towards growing and climbing the success ladder, it is generally the last 10-5 years left to retirement that people eventually start worrying about savings and retiring. But today, given the changing scenarios, it is highly advisable that employees start saving early to ensure that they could retire in a secured and more comfortable way. And isn’t this what all of us would want? And it requires no rocket science to understand that more savings would eventually lead to better after-retirement lifestyle.
While retirement calculator, software programs, spreadsheets or any other retirement planning tool guides you on better management of your savings or helps you figure out additional sources of savings, sometimes unexpected external factors can led to miscalculations of your savings. The information on expenses and savings you have today might be of different value tomorrow. Did you completely check all of it while making retirement calculation? Maybe yes or maybe not! Let’s guide you to seven important aspects that one must keep in mind while making the right retirement savings planning.
The main purpose of retirement saving is to make sure that after retirement you don’t face hardships or hurdles and live your life with easy. But have you thought about how much you have to save and for how many years? You can save according to the data of average life span in your country. But we all are aware how uncertain life and death are. Take into consideration every factor of your health and uncertainty while you save up for retirement. To be on a safe side consider the fact that you will live a long and healthy life which may require more savings than you actually thought.
Spending after retirement
Your life now and your life after retirement will be very different and so will be the expenses and the spending. Most of the people around generally save according to the default rule of 70-80 percent of their income. That is one of the ways to go about it. Experts suggest that the most suitable way to save for future is to begin with looking at your expenses now and then compare them with the situations after retirement and to save correspondingly. For say, you are staying at rent now but later you might want a house of your own or say you spend more at travel and eating out now but later on it might get reduced. It is wise to consider your later expenses while saving.
Economic Factors and Inflation
There is one nothing nobody is always sure of and it is the economic factors. You know the current circumstances but what about inflation in future? Did you considered that into your retirement calculation? You might think that whatever you have saved up is enough but inflation and economic factors have always managed to surprise us. Experts and researches say Inflation is estimated to increase in future by nearly 3 percent. You will not know exactly, but even a little bit of information is enough to help you save wisely.
Calculating the Tax Rate
A huge number of people calculate their income and savings based on the marginal tax bracket. While it is beneficial to many, it will eventually affect you if your income rises above the estimated limit. In a time period of growth and higher salary, going for marginal tax bracket might be subjected to more tax cut; instead you can opt for the effective tax rate which is the average rate at which your income will be taxed. Collect all the data available on both the tax rates and calculate before making your pick for the suitable tax rate that you want to opt for.
Social Security Benefits
One of the most important aspects while calculating the socials security is to ensure that the figure that you now punch into your retirement calculator matches the value of the amount in future. The social security web site now displays the projected benefits of an individual instead of sending mails. While picking out for your benefits ensure that you are thorough with all details of projected trust fund and are aware of the most suitable situation under which you will benefit more.
Average Annualized Rate of Return
By now every working individual is aware how surprising the stock market can be at times. While it might be probably going great for some time, it is never the same always. Sometimes the interest rates on stocks are lower while sometimes they are higher. It is possible what you have now in lower rate might increase in future and vice-versa. Taking a risk is highly not suggestible. Consult a financial expert regarding all the changes in stocks, bonds and cash while making your savings based on this.
Income from property or real estate
People generally ought to calculate their home or land as a retirement asset but unless they are earning out of it like by either renting it or selling it, it is not counted as an asset. The benefit or income you earn from is only after selling or mortgaging the property. In case you choose to do so, you should then consider it in your retirement calculation as a source of income. Remember, real estate has always profit earning and for many people it has been in fact a huge source of income.
When there are calculations there are always the chances of errors and miscalculations. Retirement calculator is undoubtedly a great tool of calculating your savings and making the best retirement plan but sometimes even they also cannot escape the chances of errors if the information is ambiguous or fluctuates. So, consider wisely all aspects as you save up your hard earned money for retirement and make a secure and safe plan.