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Financial Planning - Retirement

Planning for retirement is one of those things that has finally become something I think about because my parents are getting close to retiring.  I feel like I didn’t take it seriously enough and lost the last twenty years of my adulthood.  I could have been planning and saving.  The truth is, it wouldn’t have made much of a difference because I was too young to think it was important.

I did attend a class (lecture?) on financial planning and retirement was a big part of that.  It’s strange to think about what retirement looks like.  My parents don’t look like retirees.  They are far too young.  I sort of have this expectation that I’m going to be really old when I retire.  But even if I retired at age 70, I could live another 28 years (according to current life expectancies).  My grandmother lived until she was 90 so we are still looking at 20 years.

So this is what I started with – I took my current income, since I know we can survive on it, and multiplied it by 20.  That falls somewhere between $400,000 and $500,000.  I read somewhere that you should budget for 80% of your current income, I think you should budget the whole amount because there’s inflation and other things.

Now, I turned 40 last year so I have about 30 years to save and invest so that I can reach those numbers.  I, currently, have two forms of retirement – Social Security and my company retirement.

I love that Social Security now has an interactive website www.ssa.gov.  Going into Estimated Benefits, the site tells me how much I will receive if I continue making my current wage.  It is, also, broken down by retirement age and if I become disabled.  Since my plan, is to retire at 70 and stay in my current job for as long as possible, I could earn enough to make up over $350,000 of my needed $400,000 to $500,000.

But I have to remember that I will need to have enough to cover my Medicaid expenses.

Then I look to my current retirement plan.  I have about $14,000 in my account at this time.  So if I use that as a measurement of how much I would put in every 5 years (since that’s about how long I’ve been here now), I multiply $14,000 by 7 (35 years).  This gives me another $100,000.

With that math, it looks like I am good but what happens if I’m not able to work until I am 70 or if I lose my job and can’t get another.  I need a back-up plan.  That is why it is encouraged to diversify your investments.  I’m looking at things such as CDs and Savings Bonds.  While they do make some money, what they do more is hold the money in place so you can’t spend it.  Until we are in a position to set aside money, we are putting the research on hold.  I’m just hoping we will be in a position soon to save money.

There are other things you can do that may not benefit you completely but will help care for your family.  The first is life insurance.  This is especially important if only one person works.  I have life insurance for me and my husband through work.  I recommend, if your company offers extra insurances for you and your spouse and children that you seriously consider them.  I pay about $5 a month for my husband’s life insurance.  My son is also insured.  We bought a Gerber Life insurance plan when he was a baby.  I figured it was a manageable way to invest in my son’s future.

There is something else, I’d like you to consider – a funeral/death plan.  It took a long time for me to convince my husband that this is important.  He can barely talk about what will happen if I die.  My years in home health, I saw how not planning can devastate a partner.  I, also, saw how amazingly wonderful it was on my family that my grandmother had everything in place.  Everything was taken care of and my mom and her sisters didn’t have the extra burden of making the arrangements.  It’s something I want to do for my family.  The added benefit of paying for your plot and whatnot now is that the price is locked in.

There’s more information out there and everyone’s situation is different.  Please share your tips for planning for retirement (my mom once said that her plan was to get really fat so she’d have plenty for retirement).  Come back next week, when I share my thoughts on planning for college.