Retirement is the last thing on most people's minds when they start work and earn an income for the first time. It is something that is about 40 years away. But is it that far off?
Those 40 years translate into a mere 480 pay days. From those 480 pay cheques you will have to save sufficient money to live for the rest of your life after you stop working. If you live the high life when you are young, without saving, then you cannot expect to retire young and wealthy.
The questions often asked are: "How much do I need to save for retirement, and how much money do I need in capital when I retire?"
The simple answer on both counts is: as much as possible. The more you save, the earlier you will obviously be able to retire.
In assessing retirement, you need to calculate how much money you want in retirement and how much you should save to achieve that target.
The best way to establish how soon or late you can retire is to have your overall finances analysed by a qualified financial adviser doing what is called a financial needs analysis.
A financial needs analysis does a number of things for you:
- It can identify how much you need for retirement and other things;
- It can identify the needs of your dependants if you are no longer able to provide for them;
- It tells you what you can afford and what you cannot; and
- It clarifies your lifestyle goals.
For retirement planning, a financial needs analysis helps:
- In the build-up stages, to establish how much you need;
- In the final lap, to plan your retirement structures; and
- In retirement, to make the fine tuning to ensure you don't outlive your savings.