Making Retirement Calculations

Prudence is defined as having caution with regard to practical matters. On first glance, this might not seem to have a lot to do with retirement planning, but it is actually very important for you to be prudent when planning for your retirement. If you are not, it could cause you more problems and worries than you would like as you enter your golden years.

Certainly the biggest thing to be prudent about is when calculating how much money you are going to need to save for retirement. If you set this number too low, you could run out of your retirement savings, which would cause a lot of stress for you later in life. By being prudent, you should plan to save more than you think that you will need, and then you will not have to worry about it when you are older. It will take more work now, when you are younger, but the payoff will be well worth it, when you can simply live and not have to worry about the financial side of things, and whether you saved enough money or not.

You should also be prudent when trying to figure out when you will retire and how long you will live. Even if you plan to keep working until you are 70, you should be prudent and plan for that not happening. You may have the best intentions, but you could be forced out of your job, have an accident, etc. It is always better to be safe, and being safe means being prudent. Likewise, people probably assume they will live until they are about 80 or 85, and then plan accordingly. But what if you live longer? You could run out of money if you don’t plan wrong, and when you are that age there will not be a lot you can do about it (in terms of adding more income). Prudence is key there also.

You should also be prudent in regards to how you are investing your retirement savings. If you have a long way to go towards retirement, they should be in stocks, and other things with higher risk and higher reward. However, as you get closer to retirement, they should be switched into things that are safer, so that you don’t lose a large portion of that nest egg you have been building up.

There are a lot of calculations that go into figuring out how much money you need to save for retirement, but you must be prudent when making them. That way, you won’t have to worry about finances when you retire, but you can simply enjoy your golden years as they were meant to be enjoyed.