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