Few things in life cause more stress than confronting the reality of the financial aspects of retirement.
Using a retirement planning calculator in the early stages of retirement planning can certainly help understand the current and projected future situation.
The general reaction to retirement planning is one of fear and trepidation. There is a concern that your life is going to disappear down a hole in the ground unless you have huge amounts of money available the day you stop working.
This thinking is understandable but really not necessary.
But it is important to know where you stand financially, accept the situation and then build a plan around that. The financial issues will not go away by ignoring them and hoping for the best!
How does a retirement planning calculator work?
It is quite simple. You will be prompted for information regarding things like your age, your savings and investments, current contributions to funds and expected monthly income requirement.
They then give you an indication of how much you still need to invest while you are working in order to cover the monthly income you say you'll need when you stop working.The two key issues here are, firstly, what you can afford to contribute for the remainder of your working life and, secondly, what you will need to live on once you have stopped earning an income
Before we continue about using a retirement planning calculator, just a word regarding a major misconception today regarding retirement.
Are you a part of the 4%?
Less than 4% of people who retire will be able to sit back doing nothing because the income from their investments will take care of everything.
If you are among this 4% then that's great and you have nothing to worry about financially. For the vast majority of people out there, accept the fact that you will need to supplement your income and adjust your lifestyle.
So, back to the retirement planning calculator. The exercise we are
describing will tell you what your retirement monthly deficit is going to be.
Hopefully you will be doing this investigation early enough to leave you enough time to work on the rest of your plan.
You will know well in advance that, based on what you know now, that whatever investment income you have will be a certain amount short on meeting your monthly bills and living expenses every month.
Need for extra income
So, the long and the short of it is that you will either have to bring in some part time income, or revisit your lifestyle expectation, or probably a bit of both.
Thanks to the retirement planning calculator, the financial reality is now out in the open and you can start working on your plan to deal with the situation.
There are many opportunities for people who have retired to supplement their income. Part time or flexible hour jobs are popular with employers because it reduces their cost of employment.
There are literally hundreds of ways that one can earn money on the internet and there is also the option of a home based business.
By planning and doing research before the time it is possible to more than supplement your investment income you'll be in control to enjoy your golden years!