| There exists the belief that assessing your | | | | catered for. |
| retirement needs is difficult as it is impossible to | | | | Once you have an idea of the income replacement |
| accurately anticipate the future. However, retirement | | | | ratio, you then need to convert this to your desired |
| planning allows you to model your future based on | | | | yearly income in retirement. You must decide how |
| known variables in the present. What makes it easier | | | | much money you will need to have working for you |
| is that retirement needs assessment is unique to an | | | | in order to receive that projected annual retirement |
| individual. | | | | income. For example, if you need an annual income of |
| The first step to assessing your retirement needs is | | | | $100,000.00 for retirement and you feel that a return |
| to ask yourself "How do I envision my retirement?". | | | | of 8% is a rate of return that you can achieve, then |
| The answer gives you an idea of what lifestyle you'd | | | | you'll need to accumulate a fund of $1,250,000.00 to |
| like to have. Whether you wish to maintain your | | | | provide that income. |
| lifestyle or increase your standard of living, will have a | | | | In assessing your retirement needs, some basic |
| major impact on financial considerations. | | | | information is required:a) Retirement ageb) Current |
| The next step is to translate your anticipated lifestyle | | | | agec) Current income or expensesd) Retirement |
| into expenses. For those who do not have | | | | income replacement ratioe) Projected inflationf) |
| extravagant retirement dreams (travel and other | | | | Average long-term interest rate or rate of return |
| luxuries), a simple assessment of expenses would do. | | | | It is not enough to just know what your retirement |
| In assessing how much you will need in retirement, it | | | | needs are and the enormity of the figures involved. |
| is essential to use a figure from the present and | | | | The main reason for retirement planning is to take |
| convert it to a future value- usually on the basis of | | | | action now so that you can achieve that goal later. |
| headline inflation. | | | | Its purpose is to help you to determine how much |
| Ask yourself how much of you present income you | | | | you need to save and where you need to invest if |
| can survive on comfortably for a thirty-year period | | | | you are to have a comfortable retirement. It must |
| and project that amount to a future value (at your | | | | be noted that a comprehensive retirement analysis |
| retirement age) based on a projected headline | | | | caters for inflation before and during retirement. |
| inflation rate. Your retirement age and ambitions | | | | Several financial calculators can help with this. |
| should provide a guide to how much you need. | | | | The great thing about your retirement needs is that |
| A simple lifestyle may require only 80% of your | | | | it's all about you! You need money to live at any time |
| income, whereas catering for a longer retirement | | | | in your life. Retirement needs assessment only |
| period suggests that you should be aiming for a | | | | indicates how much you may need at that juncture. |
| higher percentage. You should also include contingent | | | | As with any other aspect of financial planning it is |
| retirement expenses. That you may have fewer | | | | important to be prudent. Prudence, in the context of |
| living expenses in retirement is not an invitation to be | | | | retirement needs assessment, means having more |
| too conservative with your estimate. Higher medical | | | | instead of less. Indeed, it is better for you to die |
| expenses and emergency money must also be | | | | with savings than live without! |