| Knowing what your retirement income and expense | | | | Bill has necessary annual expenses are |
| will be is essential to planning your retirement life. You | | | | $5,000(housing), $4,200 (utilities), $5,600 |
| can estimate your income and expenses under your | | | | (transportation), and $3,700 (taxes) for a total |
| present circumstances. If you're not happy with the | | | | necessary living expense of $18,500. He estimates his |
| results, take some quick steps to fashion a better | | | | entertainment expenses at $16,000 (about $40/day). |
| retirement. Here's the process: | | | | He'd like to see how much would be available for |
| Project Your Retirement Income: | | | | travel. |
| Your base retirement income is made up of three | | | | First, Bill total retirement income from above is |
| parts: | | | | $37,500. His total expense comes to $34,500 from |
| 1. your pension income, | | | | both his necessary living expenses and his normal |
| 2. your social security income, and | | | | entertainment expenses. Comparing these totals, his |
| 3. income your savings will generate. | | | | retirement income exceeds his normal living expenses |
| Check with your company for your pension income | | | | by about $3,000. So this is how much he has for the |
| estimate. Then estimate your social security income | | | | travel he'd like to do. |
| from the Social Security website. Project your total | | | | With this approach, Bill - and you - can see how tight |
| savings 5 years hence. Use about 5% of that | | | | or loose retirement will be. If your retirement |
| projected savings as its contribution to your yearly | | | | circumstance is unsatisfactory, then you can choose |
| income. Now total these three incomes for your | | | | to enhance your retirement income by |
| annual retirement income. | | | | * Saving drastically more for the next few years to |
| As an example, Bill's pension gives an annual income | | | | enhance your assets |
| of $12,000; his social security is about $13,000, and | | | | * Working part-time during some of your retirement |
| his saving's income is $12,500 (= 5% of his projected | | | | And/or you can diminish your retirement expense by |
| $250,000 savings) for an estimated total retirement | | | | * Reducing unnecessary expenses |
| income of $37,500. | | | | * Moving to where the cost of living is less |
| Project Your Retirement Living Expenses: | | | | Determining how to modify your retirement can be |
| Your necessary living expenses are: | | | | just a matter of determining how much more you |
| * Housing (rent, RE taxes, mortgage), | | | | can reasonably save for retirement. Or, it may put |
| * utilities (tel., electricity, gas, oil), | | | | you on a track to redesign your retired life into a |
| * transportation (car insurance, gas, repair, | | | | new life style in a whole new place that suits your |
| replacement), | | | | budget and your happiness. |
| * clothing and | | | | Bill found that selling his house and buying another in a |
| * taxes(10% of income). | | | | cheaper country - off shore - to enhance his savings |
| Your optional annual expenses are for: | | | | and drastically reduced his expenses. Selling his house |
| * entertainment (dinners, movies, pocket change, | | | | freed up about $50,000 in equity after arranging to |
| etc) and | | | | buy a cheaper house elsewhere. This produce |
| * travel. | | | | another $2,500 (=5% x $50,000) of annual income |
| Add the total of your necessary annual expenses as | | | | from savings. His living expenses dropped by $5,000 |
| you incur them now - if that's where you'll be living in | | | | too by moving off shore. |
| retirement. And total your optional annual expenses, | | | | Look how these changes modified his income and |
| too. | | | | expenses in retirement. His total income increased by |
| Compare Retirement Income to Retirement | | | | $2,500 to $40,000 while his leaving expenses |
| Expenses: | | | | decreased by $5,000. Those, together, added $7,500 |
| Now, compare your total income and expenses. With | | | | to his previous $3,000 to give a total annual traveling |
| this done, you can see now where you come up | | | | budget of $10,500. He now has plenty of money to |
| short - or not. You've got to know where you are | | | | do some traveling wherever he wants to go - or just |
| now so you can determine what you can do about it! | | | | to go back to 'the states'. |
| An example: | | | | What about you? |