Many financial planners and other financial consultants will use financial clichÃ©s to get you on board. Some of them use all the tricks they could possibly know to sell something. After all, they are paid on a commission basis. Donâ€™t get me wrong, I donâ€™t think they are a bunch of clowns. A lot of them are really good and I strongly suggest meeting with few of them to select a good one. However, in order to protect your wallet, Iâ€™ll create a series of post related to financial clichÃ©s.
One of them is to aim 70% of your current income at retirement. I have seen many bloggers talking about this 70%-80% rule recently. Several individual use this as a rule of thumbs to plan their retirement. Depending on what they want to do then, they might end up doing less than 70% of their project!
Retirement planning must be done on a case by case basis. For someone who wants to plant some flowers, to fish in the river nearby and to have their Starbucks every morning, he will surely need less than 70% of his income.
It is also the case if you plan to retire debt free, downsizing your property and driving the same car for ten years. If itâ€™s your case and you are building an investment portfolio that will provide too much income. You will end up leaving a great legacy to your children!
However, if you want to go golfing every day, travel all over the world and buy a new car every three years, youâ€™ll probably need 110% of your current income. Some individuals spend more money at retirement than while they were working.
In order to avoid this situation, you might want to retire at the age of 60 or 65 instead of 55. Personally, I wish I could retire at 50. Therefore, Iâ€™ll need a really good retirement plan! I would like to start a small business and work on my own. Then, I could retire early and do what I want for living.
You also have to consider that you might live a long longer than your parents and grandparent. According to a Sun Life Study, during the past 40 years, our life expectancy has increased by 3 months every year. Many scientists thought that this trend would not continue but it seems that we will see 90 years olds jogging around shortly. Imagine, that’s 40 years of golfing every day if you retire at 50! Whoa! However, you must plan to have a lot of money on the side in order to do so…
Another way to make money while you are retired is to accept contract from your previous employer. They might need your experience and knowledge to assist a group of new employees starting in a new department. Or they might need an extra employee for six months.
This is why it is so crucial to have a retirement plan that suits your needs. Establish your priorities and your financial obligations before determining how much you need to retire. You might be surprised in a goodâ€¦ or a bad way.
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