Note to self: Retire someday. But first I need to pay that parking ticket, make a vet appointment for the dog, find some new kitchen cabinet pulls and, and, and....
Sound familiar? Funny how a "to do" list full of trivial items can supersede chores that will have a much bigger impact on your long-term well-being. Far be it from me to judge: I don't dare fess up to the hours spent on eBay (Nasdaq: EBAY ) instead of writing this article. But even worse is one day having to admit, "Oops! I forgot to plan my retirement!" (That is, after one last search for clear Lucite cabinet pulls. Helpful advanced search hint: Narrow the list asking the search engine for "Lucite" -- "without" the words grape, grapes, bracelet, earrings, ring, spa, tub, purse, jewelry, necklace.)
Put your eBay-ing on hold and see whether your retirement is going to be the carefree romp you've hoped will be. What can you do in just 300 seconds? This Ballpark Estimate worksheet will help you do some back-of-the-envelope retirement accounting and take a lot of the guesswork out of saving for your future. That's a lot more future-casting than most people have done at your tender age.
This brief but eye-opening exercise provided by the American Savings Education Council asks you to ponder (but just for a moment, honest) the big questions about your golden years. For instance, how much of your current annual income will you need? For low-key retirees, 70% to 80% of your salary may do quite nicely. For those many years from retirement with visions of a long, active life ahead, 100% to 120% of your current income may be necessary. The good news is that many expenses decline or disappear completely in retirement.
You'll also be asked to consider any money you'll get from Social Security, an employer's pension (for the lucky few out there) or earnings from part-time work. You may think you want to quit the nine-to-five world for good, but not everyone wants to be -- or can afford to be -- a beach bum grandparent. Consider a "rehearsal retirement" to make sure you'll actually like the life of leisure you've planned. (It's also a great excuse to take a long weekend or two and call it "research.")
Panic attack: Please hold
The interactive worksheet will estimate how much money you need to bank in today's dollars for each year you'll be retired. You'll then see the total amount of money you should have in your brokerage account on the day you retire. Once you provide your current savings and the years you have until retirement, a still mind-numbingly large, but lesser-so, number will appear.
Postpone your panic attack. (This instruction is actually in the official Ballpark Estimate worksheet directions.) The accounting whizzes working behind the scenes provide a much more reasonable yearlysavings goal, which should bring the color back to your face. (Tonight you'll give thanks for the magic of compound interest and vow to improve your investing smarts with other soon-to-be retirees who have vowed to rule their retirement with the Fool's help.)
Once you've tabulated the results, you may feel a wee bit more generous toward your future self. How about upping the contribution to your work retirement plan and adding to your IRA? Even a few percentage points can make a big difference in the long term.
Now rerun your Ballpark Estimate calculations. See? You're already making progress.
Now it's back to the Lucite hardware search for me!
Retirement ready list
For other moves you should make for your golden years -- insurance, housing, asset allocation, and other post-nine-to-five surprises, here's further Fool reading:
- What Retirement Will Cost
- How Much Will You Need to Retire?
- The Power of Pensions
- 7 Social Security Myths
- What Will You Do in Retirement?
- How to Rule Your Retirement
- Fool Retirement Center
- Ballpark Estimate Worksheet
Dayana Yochimkeeps a handy list of "to do" items near her computer, just in case something important comes up. The Motley Fool isprocrastinators writing for other procrastin... hey, those are cool doorknobs...