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Easy Retirement Plan Analysis

By: Eric Bayne

Easy Retirement Plan Analysis

You have prudently invested your money in a 401k for years, are ready to retire, and are looking forward to a long and peaceful retirement with no money worries. But have you actually taken the time to sit down with pen and calculator in hand to figure out exactly how much of your monthly expenses your 401k fund will cover? If you haven't, you may be truly shocked when you finally do get around to it.

The majority of workers have never taken the time to come up with a long term money strategy for retirement. Unfortunately, for most people, doing so never seems to rise to that degree of importance. Yes they will save a bit here and there and a few may even have a organized savings plan where a certain sum of money is taken out of their paycheck weekly and deposited in a fund. But very few people go through the hard process of putting down in writing such basic facts as what age they plan to retire, how much money they'll need when they retire, and how much money their fund will provide for them when they retire.

And that's a big mistake. It's also why when the big day finally comes, many new retirees will belatedly discover that their 401K and Social Security payments will not even come close to covering their monthly dollar outlays. So, unfortunately, at the age of 65 or whatever age they retired they discover that they have to go back to work - sometimes part time but sometimes full time - in order to make ends meet.

So, why does this scenario happen so often? And is it avoidable? To put it bluntly - it happens because they failed to make themselves a retirement plan. And yes, this situation is avoidable - if you don't wait too late to start. So let's start now.

Here's a sensible and simple method to try in your effort to create a retirement plan. Ask yourself these questions. How much money do you presently bring in over a month? Many experts believe that you'll need at least 60 to 80% of your pre-retirement gross earnings to allow you to remain at the same standard of living that you currently enjoy. Being conservative, let's assume that you'll need 80% to be comfortable. So, if you make $4,000 a month, your retirement fund plus Social Security payments would have to provide you with at least $3,200 a month.

Now ask yourself. How much will your current 401k fund plus Social Security provide for you at retirement. Is it at least 80%? This part may take a bit of work on your part, but there are calculators all over the Internet that can help you to answer this question.

If you find out that your retirement fund as currently established won't provide you with at least 80% of your pre-retirement gross earnings, then unfortunately you have one of two hard decisions to make. Either you make a willing decision to lessen your standard of living at retirement. Or, you make a conscious decision to growth the amount of money that will be in your fund when you retire. You can achieve this by either taking an extra job and placing the extra money in your retirement account or by choosing more lucrative investments. Whatever decision you choose, at least you won't be going into your retirement years financially blind.

Admittedly, this quick and easy analysis of your retirement plan does not take into account many factors that a exhaustive analysis would. For example, we've left out factors such as whether your home will have been paid off at retirement, whether you'll still be supporting your children at retirement, and whether you have other significant debt loads. But it is extremely worth it to you to map out a thorough retirement analysis plan as soon as possible. And even a quick and dirty plan such as this is more than most people do and is better than no plan at all which, sadly, is what most people have.

Article Source: http://www.topicinfo.com

Eric Bayne is writer and researcher for www.retirementplanhelper.com . Visit his site to find out where you can find information on retirement planning for self employed .

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