How long will you live? It’s an impossible question to answer, but let’s do an imagination exercise. Imagine that you will live to be 100 years old.
As the decades progress, you may face a range of issues, including health, mobility, and life satisfaction. And you will definitely encounter concerns about money.
Thinking of your future 100-year-old self, how will you plan today to meet your needs near the end of your life?
This can be a difficult subject for people to think about, since some have seen older family members or acquaintances encounter challenging circumstances, and others simply don’t know where to start when planning for their senior years.
But your future self will thank you, so let’s consider some solid steps that can ease money challenges in those later decades of life:
- Calculate your retirement savings plan based upon a life span of 100 years
- Plan your retirement savings rate based upon an early retirement age, such as 60, which takes into account a potentially lower Social Security benefit
- Practice living on a reduced, fixed income, since this will be more difficult in old age than while you’re younger and can substitute your time and labor for things that you may have to purchase while elderly
- Build good physical and mental exercise habits, to ensure that you can stay physically healthy and strong for as long as possible – which can help you save money too
There are many ways you can check your progress on the path to retirement. One way is to calculate how many multiples of your annual salary you have saved, and aim for 8 to 10 times your salary by retirement age.
Another way to check your net worth progress is to use Thomas Stanley’s calculation:
Your Age divided by 10, times your Salary
Example: 40 years old divided by 10 = 4, times your $50,000 salary = $200,000 ideal minimum net worth
Let’s also think about your life satisfaction. How will you stay mentally stimulated in your later years? Do you plan to continue doing what you do now outside of work hours, but just more often? What new hobbies do you plan to take up, and how much will they cost? It’s important to factor these in to an experimental budget for your retirement years.
Services and costs will change over time, and so any estimate you make now will inevitably be adjusted. But preparation – both mental and financial – is key to making the year 100 a year to look forward to and celebrate.
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