If you thought that buying a home was hard, retirement planning can be just as difficult. The toughest fiscal challenge most people face, planning for the non-working years takes time and money. Those who do it well will spend their golden years living financially stress-free. Here's how to become a retirement planning ninja.
Create a target goal
How much will you need? That's the million-dollar question, literally. Since the Department of Labor estimates that you'll need to replace 70 percent to 90 percent of your pre-retirement income for each year of retirement, you can estimate your target goal based on your current income and life expectancy. Of course, this is just a rough estimate. Factors like whether or not you'll own a home at retirement, vacationing habits and medical expenses will significantly impact how much you'll need to save.
Assess your progress
With a target goal in mind, you can assess how well you're doing. Here's where it gets tricky. On top of examining how much you've already stashed away in a 401(k), 403(b), 457 plan or IRA account, accurate retirement planning requires you to factor in such variables as Social Security benefits, the inflation rate, upcoming salary raises, the rate of return on your current retirement investments and the value of other assets such as pensions and life insurance. You may not know all the answers offhand, so you'll have to employ some guesstimates.
To simplify the math, Bankrate's retirement planning calculator can provide a projection of how much you'll have based on your current savings rate, as well as some suggestions