Savings Goals

 Define your retirement lifestyle and project the income required. Evaluate your current financial health and set savings goals to accumulate the wealth required to support your retirement income.

Before you develop your savings goals you need to accumulate some information and data. Buy a notebook and record every scenario you may encounter for each topic.

Define your desired retirement date.

Set aside time to develop your plan.

Define your desired retirement lifestyle.

Project the income required for your desired lifestyle.

Evaluate your current financial health.

Determine the amount of wealth required to produce your projected income.

 1. Retirement date

 Write the following in bold print on the cover. We will retire on MM/DD/YYYY. Make it big. This is a good motivator. Every time you see the book you will be reminded that you need to develop your savings goals. Print this statement on your computer and place it in a conspicuous place.

 

 

 

2. Set aside time to develop your savings goals.

 It is imperative that time be set aside to develop your savings goals.  If you must miss a session, reschedule another as soon as possible.  As we will demonstrate later, time lost is asset growth lost.

3. Retirement Lifestyle

This topic is an extremely important subject for the development of your savings goals and should be evaluated and defined very carefully. Your required accumulation of wealth will be based on your chosen lifestyle. Below is a list of considerations to get started. Record as many as you can. Review this topic frequently.

    • What hobbies are you going to pursue?
    • Do you have plans to travel ? If so, where?
    • Are you planning to relocate?
    • Will you have a second home, or a motor home?
    • Will you need health insurance to cover you between your retirement date and your eligibility date for Medicare.?
    • Do you want to work part time to supplement your income until you are at full retirement age?
    • What are your spouses retirement plans?
    • Will you have elderly parents to care for?

Every couple has different issues to consider. The purpose of this list is to stimulate your mind to cover as many scenarios as possible. The more quality time you spend on this subject, the better prepared you will be to develop your savings goals.

4. Project the income required for your desired lifestyle.

In this step for the development of your savings goals you need to project the income required to support your defined lifestyle. If you are now utilizing a budget program or spreadsheet this task will be much easier to complete. If not, a purchase is in order or you may want to consider online personal budgeting system.  We also offer a free budget spreadsheet.

A. Record all financial activities for the last twelve months.

B. Save this data for future use.

C. Move your data to the budget columns.

D. Research the revenues required in today’s economy to support your retirement lifestyle. Some examples:

      • Travel Plans.
      • House paid off. No house payment.
      • Insurance
      • Income taxes and property taxes.

E. Revise your expenses based on the current economy.  You will probably have to research the cost of activities such as travel. 

F. Project actual income based on the current economy required to support your chosen retirement lifestyle.

G. Use a retirement calculator to determine the required inflated income.

5. Current Financial Health.

This process for setting savings goals involves the calculation of current net worth.  Some individuals confuse the comparison of income and expenses, or net cash flow, with net worth.  Net worth is basically what you own less what you owe.  To calculate net worth:

A. Make two lists.

1. Assets. Include cash in bank (checking, savings, certificates of deposit), securities(stock, bonds, mutual funds), notes or accounts receivable, real estate, cash surrender value of life insurance, personal property (Autos, boats, Jewelry, etc.) and retirement funds ( IRA, 401K).

2. Liabilities. Include credit card debt, revolving account balances, notes payable (Auto loan, personal signature loan, etc), taxes payable, real estate mortgage balances, other liabilities (unpaid medical bills, any other money owed and not included above).

B. Net Worth = Assets - Liabilities.

6. Wealth Required For Retirement Income.

In step four, the required retirement income was projected. In this step the wealth, or savings goals are set. There are some factors to be considered before setting the goals. Some individuals want to set them based on their accumulated wealth only. Others base their goals on certain criteria, such as pensions and social security. Another consideration is to be debt free, including no home mortgage. After those decisions have been made the savings goals are ready to be set.

To live comfortably you should not withdraw more than five percent of your accumulated wealth in one year. As an example, if you require annual income of fifty thousand dollars you will require one million dollars in savings.

Income/.05 = Savings

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