Your Wealth, Health, And Lifestyle Newsletter

Do The Math Before You Retire

By Jason Markum

We all look forward to retirement. After all, you’ve worked your tail end off for all of your adult life, it’s time to kick back and take it easy for a while… you deserve it!

But before you retire make sure that you’ve done the math correctly in order to determine if you are actually able to retire right now. Many people do the math wrong and only realize after the fact that they don’t have enough money to live off of for a prolonged period of time. Usually by then, it’s too late to do anything about it. Don’t get caught in that same trap.

That’s what I’m going to talk about in this article today. I’ll discuss some of the things you should calculate before you retire to make sure that you have enough money set aside to support yourself throughout the rest of your days.

First of all list all of your assets… these will include real estate, any insurance policies you have, company profit sharing plans, non-income producing assets like paid-up life-insurance and furniture and things like that around your house, as well as assets they require ongoing costs for maintenance such as houses and cars and things like that. Basically we’re talking about all of your income producing assets as well as non-income producing assets.

Sometimes you won’t be able to get an exact dollar amount for many of these things, so it’s okay to estimate a dollar value. I suggest estimating the potential low-end and the potential high and. For instance if your house might sell for $200,000 or maybe $260,000, make a note of both prices. Then create a list of all your assets with the estimated low-end, and create another list of all of your assets with estimated high-end of their value.

Next calculate your after retirement income. In this list we usually include any income from assets such as rental property and dividend paying stocks and interest paying bonds; things of this nature. It will also include any pensions that you might have, as well as your Social Security payments.

These two areas will give you a fairly good idea of how much money you have during retirement, now we need to calculate your expenses… and that is the next step.

Expenses are fairly easy to calculate because you already know what your expenses are. But there are a couple of traps that most retirees don’t factor in. One is health insurance. Up until now it’s likely that your employer has paid for your health insurance, but that won’t be the case any longer. And health insurance is always more expensive the older that you get so be sure to factor this into your postretirement expense calculations.

Also, be sure to calculate for inflation; your costs will increase with at least the same rate as inflation every year most retirees fail to calculate for inflation and fall into a massive trap.

If your expenses are more than your retirement income, then it’s time to sell some of your assets or put off retirement for a while…

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