Can You Afford to Retire When You Reach Retirement Age?

Many people, after having invested much of their money into a safe retirement plans for self employed, are ready to begin their retire with no money problems. In fact, 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 removed weekly or monthly from their paycheck and automatically placed in a fund. But relatively few people go through the tedious process of writing down such elementary and relevant facts such as what age they are planning on retiring, the amount of income they’ll need when they retire, and how much cash their fund will realistically provide for them when at retirement.

And that's a big mistake. It's also why when retirement arrives, many people will find out too late that the combination of their retirement funds will fall far short of enabling them to live comfortably. And when they decide to retire at the age of 60 or 65, they find that they have to return to work in order to meet expenses.

This scenario happens over and over again. But why? And can we avoid it? To put it bluntly – it occurs 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 practical, easy way to at least begin to create a retirement plan. How much do you currently earn a month? Most experts figure that you’ll need at least 60 to 80% of your pre-retirement gross income to keep you at the same standard of living that you now enjoy. So let’s be conservative and figure 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.

Then answer the question – what percent of my current living expenses, adjusted for inflation, will be covered by my current 401k fund, in addition to social security? Is it at least 80%? It may take a bit of time to calculate, but this is critical information. If you need help, you can find calculators across the Internet that can assist you.

If you discover that your retirement fund as currently constituted will not provide you with this 80% of your pre-retirement gross income, you have one of two hard choices to make. You either make a conscious decision to lower your standard of living when you retire. Or, you make a conscious decision to increase the amount of money that will be in your fund when you retire. You can do this by either taking extra jobs and placing  the excess money in your retirement account or by choosing more profitable investments. Whichever decision you choose, at least you won’t be going into your retirement years financially blind.

Now admittedly, this quick and dirty retirement plan analysis does not take into account many factors that a thorough analysis would. For example, we’ve left out factors such as whether your house has been paid off at retirement, whether you’ll still be supporting your children at retirement, and whether you have other substantial debt loads. And it’s more than worthwhile for you to map out a thorough retirement analysis plan as soon as possible. But even a quick and dirty plan such as this is more than most people do and is better than no plan at all which, unfortunately, is what most people have.