How to set goals for retirement

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Planning for retirement comes down to goal setting. You need to have a good idea of what your need will be, what kind of lifestyle you want, and what you need to do to prepare. Your retirement plan can change many times, but you should at least know your goals and how you will achieve them.

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1Determine your need
Determine how much money you will need in retirement, and what you need to do to get that amount. You can start by looking at your current cost of living per year, but remember to factor in the inflation that will occur by the time you retire. You might be getting by today on $40,000 a year, but in 10 or 20 years, at 2 percent inflation, you will probably need considerably more.

2Get out the calculator
Play around with some numbers and calculate your cost of living and savings potential. Most major financial institutions, like Wells Fargo and Fidelity, offer online calculators to help you determine your investment potential and how much you can expect to earn. These tools can be a great way to get started.

3Think about your lifestyle
Are you happy with your life now, or do you envision a retirement filled with more activity and traveling? If you plan to live about the same in retirement as you do now, your expenses may not go up that much. But if you plan to travel, you could see a significant increase in retirement costs.

4Your life expectancy
While none of us knows how long we will live, the Social Security Administration provides a life expectancy calculator for planning purposes. According to the calculator, a man reaching age 65 today will live to an average age of 84. A woman turning 65 today will live to be about 87. About one out of every four 65-year-olds will live past age 90.

5Save what you can
The hardest part of retirement can be the act of setting money aside. You have bills that need to be paid today, and you’re less likely concerned about 20 to 30 years down the road. But if you consider the compounded interest, the earnings on investments over that many years, your perspective might change. Financial planners often recommend that you save between 10 and 15 percent of your income. Even if you start small, by saving an additional $10 a month, you will see a difference.

Sources: The Social Security Administration; Purdue University Financial Planning for Retirement Workbook.

(Farm and Dairy is featuring a series of “101” columns throughout the year to help young and beginning farmers master farm living. From finances to management to machinery repair and animal care, farmers do it all.)

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