Not all retirement expenses are created equally. As you prepare for retirement, it is important to understand there are generally two kinds of retirement expenses:
ESSENTIAL: These are expenses you have to pay, such as your mortgage and other related home expenses, food, car bills/maintenance, healthcare, etc.
DISCRETIONARY: There are your "lifestyle" expenses, such as entertainment, travel, and other leisure activities.
A secure retirement is built on the foundation of having enough guaranteed income to meet your ESSENTIAL expenses. Of course, we all want to be able to LIVE THE LIFESTYLE of our choice, but we know at the very least that if we meet our essential expenses, we'll be able to sleep well at night.
There are 4 steps you can follow to help identify your retirement income needs:
1)ESTIMATEyou expenses in retirement 2)CALCULATEyour potential retirement income gap 3)DETERMINEyour income sources 4)CREATE AN INVENTORYof your current investment portfolio
You can use our worksheet to complete the above steps. If the result of your calculations is negative, you may want to consider sitting down and discussing your current strategy.