December 23, 2012 Leave a comment
Age is going to affect all of us differently.Some of us are going to live longer than others and in great good health.And each of us has a different idea of what would be a perfect lifestyle in our old age.Health permitting, there will always be the people who prefer to simply read or garden,others who would travel the world and the few who would pilot jets for fun.Knowing yourself and what you want and knowing your family and what they would prefer is the basis of retirement planning.
Next comes the question of when, if ever, you would like to retire.There are always the people who love what they do and Buffett – like ‘skip to work’.The’d love to work as long as possible.However there are others who would dutifully eat their vegetables first and then treat retirement as well deserved dessert to be enjoyed at 25,35,40,45…….65 or any other age of their choice.Health and the economy however might force people to cut back irrespective of their wishes.
Then there are the people with enough inflation proof passive incomes to support themselves lifelong,These incomes might even be passable down the generations .Other people might not see leaving an inheritance as a priority. They are fine with drawing down on their capital in retirement.There are people with income from property,farms and businesses and others with mainly financial assets.
People are different and their circumstances and preferences too.But it is a good idea for each one of us to have a plan for how to manage when and if we can no longer work actively-i.e. a retirement plan, for sometimes retirement might be forced onto us.
Each retirement plan will be unique, so the math is bound to be different.Just as you won’t think of buying a life plan from a financial planner,its best to do your own retirement planning.At best financial planners can be called on to run the figures and do the math for your plan.My suggestion is try doing the math yourself.Its not so hard.Its better that the plan is your unique plan rather than the professional’s plan.Also don’t confine yourself to the formulas of the wealth managers,the pension calculators and the pension plan and annuity brochures.Many of them are simplistic and a lot of them are motivated to get you to cede as much as possible of your current income to money managers without any real guarantees or meaningful returns.The present is real.And no one knows the future.So best to live in the present and increase our current assets instead of socking too away much of today’s income into low return investments.
When you do your calculations go to the basics.Itemize what you will need.Think of how you will provide for it.Buying is sometimes the lazy option.If you need to buy something,find out what it costs today and think about what it is likely to cost tomorrow.Remember some things are likely to be cheaper.Think of the frequency of purchase and then think of how you will manage it.If you opt for the lazy way of just multiplying your current income and expenses by various factors you might miss on opportunities for investments today that are likely to make you so seriously well to do as to make saving for retirement redundant.
Thinking of retirement is complex.And its easy to miss out on some or other factor.So use the info-graphic below as a rough guide.If you prefer to do things differently or your numbers vary greatly, use the info-graphic to sharpen your arguments and think things through.Talk it out with your family to be certain that you have all things covered.