Use your pay stubs to plan for your retirement
June 19, 2017
I don't know about you, but the reason that I go to work is so that i can do things that I want to do. I'm lucky that I enjoy my career, but my goal is to stop working for a paycheck and spend 7 days a week living instead of the 2 days a week that I get on my weekends now. One of the tools that I use to plan for my retriement is my real paycheck stub.
Experts say that you need 85% of your pre-retirement in order to retire in comfort. The reason is, once we're retired we're not spending money to commute to work every day and we're not putting money from our pay check stubs into our retirment savings any more and they estimate that most of us spend 15% of our paycheck stubs on those two expenses. I used to think, "Once my mortgage on my house is paid off I won't need to pay it any more...." until I realized that my property taxes go up every year and by the time my mortgage is paid off my property taxes will have gone up to the point where I'll be spending more on property taxes alone than I'm paying on my mortgage and property taxes combined today! But I won't be driving my car as much so I won't need to buy gas or buy new cars as often and I won't be eating out at lunch 5 days a week and I won't be spending money on work clothes and I won't be putting money aside for my retirement. So when I retire my expenses really will go down and so will yours!
It's safe to plan on Social Security paying you about 1/3 of your income once you retire. The actual calcualtion is here, but for most of us the end result will be we'll receive Social Security payments equal to about 1/3 of what we receive in our pay checks. That means in order to retire in comfort and security we need to invest enough money from our paystubs in our 401k, IRA, or other retirement plan every month so that we'll earn 50% of our income on our own separately from our Social Securty. For those of you who have pensions, some of that 50% will come from our pensions, but not all of it!
The 300 pound gorilla in the room that everyone knows about but that no one talks about is paying for health care once we've retired. I know a lot of people who are still working and receiveing real pay stubs every week because they can't afford to pay for their health insurance on their own, even with Medicare picking up a lot of their care as a retirement benefit! That's because Medicare doesn't pay for everything. Medicare actually denies a higher percentage of health care claims than any private insurer does, which is why so many retirees pay for separate supplemental insurance policies to cover everything that Medicare doesn't pay. So my advice when you're planning for your retirement is to plan for Social Security to do nothing but pay for your health care and to invest enough of your real paychecks into retirement plans so that your retirement plans will cover all of your living expenses. And invest enough so that you can have fun! Who wants to live at home and watch TV all day? I want to spend my retirement playing and enjoying life, don't you?
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