DID YOU KNOW HOW MUCH YOU WILL NEED AFTER RETIREMENT?

Do you know how much Will you need when you retire? Many of us, including myself, never think of how much do we need when we retire. Especially for us who belong to the generation-x. Thus we just take what the company and the government offer as a retirement plan. The question is, "Are they enough when you reached retirement age?"

No Retirement Plan

Sadly, many people who now reached retirement age don't have enough savings and investments that could sustain their financial needs once they retire.

Here in the Philippines, the retired parents who don't have enough ends up being dependent on the support of their children. Some continued to work, a few ended up in a home for the aged.

This is a sad picture for those who retire without investments. For the generation-x and millennials, however, there is enough time to prepare for your retirement. But perhaps the big question is, do you know how much you need when you retire?

In this post, I will share with you how to determine how much savings do you need when you reach retirement age. I will use two generations as examples in this post, the generation-x, and the millennials. With the help of Financial Calculator App (available in Android, iOS, and Windows Mobile), we will compute how much do we need in order to sustain our lifestyle when we reach retirement age.

How To Determine How Much You Need For Retirement

In order to determine how much you need for your retirement, the first thing you need to do is know how much you are spending annually. To do this, you must make a list of your average monthly expenses. Then multiply it by twelve then add the non-monthly expenses like house maintenance, vehicle maintenance, a yearly vacation, etc.

Common Expenses

Just to give you an idea, here are some items that you need to include in your monthly expenses:

Food
Bills and Utilities (electricity. phone bills, water, etc…)
Mortgage (vehicle and real estate)
Gas and transportation
Groceries
Children's allowances (assuming you have kids)
Entertainment (movies, DVD's, liquors, cigarettes and other vices)
For your annual and other non-monthly expenses

Education
House and Vehicle maintenance and repair
Vacation
Clothes
If needed cut down your expenses by spending less on unnecessary pleasures, or simplify your lifestyle.

Example:

let's assume that in your household the total monthly expenses are $800.00 multiply by 12, you get $9,600.00.
Add the other expenses, let's say another $1,000.00. So your Annual expense is now $10,600.00

The next you need to do is determine your country's inflation rate, or better yet a forecast of it in the coming years.

The next question is:

"John, where will I put my money that will earn 4% a year?"

One thing for sure, banks can't give you that.There are investment companies that could actually give you more than 4% interest a year. To be safe check what insurance companies are available and reliable in your country. Go to the top 10 companies that are regulated by your government. Here in the Philippines, insurance companies are controlled by the Insurance Commission and the SEC. I'm not talking about the pre-need companies that made a fiasco in the past. They were not life insurance companies at all.