Planning, being the initial stage for anything and everything, it is very important. Without making plans, nothing can work out, not even your life after retirement. If you think you can spend the retirement time by relaxing, then you need to work for it today. Retirement income plan is a plan that has a timeline for each year stating what your retirement income sources are.
Here are 5 steps to calculate what your retirement income.
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Make a chart
Make a chart with the columns for your age, the calendar year, sources of income, expenses, and taxes. You can also add a column of your spouse’s age (if you are married) next to the calendar year. Denote each row to one calendar year and keep adding everything related to that specific year in the row as per the columns. You can make an excel sheet or do it on paper. -
Make a list of retirement income sources
The second step is to list the retirement income sources that are fixed. Because you need to know how much will be each year’s cash inflow and from where. Calculate your average income. -
Calculate expenses and taxes
Next step is to calculate the expenses. Include everything in them from daily expenses like electricity bill, food expenses to medicinal expenses. Also, list mortgage expenses that are to be paid off in those years. Make sure you list taxes too. -
Gap calculation
The next step calculates the difference between income and expenses. The gap can be positive or negative. The negative gap means that expenses are more than income while the positive gap means that the income is more than expenses which means that your retirement income sources are in good shape. -
Fill the gap through investments
If the gap is negative, then it means you need to make investments for retirement income so that you can have the desired lifestyle after retirement.
After you have made the plan, go through it thoroughly, so that you can make changes if required. Keep the plan safe with you so that you can refer while buying any investment or retirement plan.