If you have retirement on your mind, and you’re Thinking about retiring, the big question is this: Are you in a financial position to do so? While nothing replaces the advice of a seasoned advisor, you can take your first step to answering this question by applying a simple 5-step calculation. In just five minutes, you can get to a simple Yes or No on whether you will have enough income and savings to cover your retirement expenses. Answer each question below in sequence:
- What are your total annual contributions to retirement savings?
- Multiply that number by the number of years left until retirement (the “when you want to retire” part).
- Add your current retirement savings to that number.
- Divide by the number of years you expect to live in retirement.
- Add that to other guaranteed sources of income.
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When you’ve completed your calculation, compare the answer to your current annual expenses to see if the amount you projected is enough to cover your normal living expenses. If you’re Thinking about retiring, this exercise, while offering a highly simplified model, will help get you thinking about what you need to do in order to retire. Be aware that this model does not take into account factors such as growth rate of investments or inflation. So, if you have questions about retirement, please feel free to reach out to our firm for guidance.
For expert advice tailored to your situation, learn more about Steven M. Ellard, CPA and our accounting services.