MoneyTalk: Effective Retirement Planning | MoneyPatrol


We, as humans, hold the idea of a decent life very close to our heart, and one of the most crucial parts of living a decent life is having a good income for sustenance before until post-retirement. However, will we be able to maintain a respectable standard of living after retirement if we do not have sufficient retirement savings? Have you already thought about what will happen when you retire or do you believe you’re too young to begin considering it now? 


This is MoneyTalk, a series brought to you by MoneyPatrol, your most advanced financial management app. This is a series in which we share various topics related to money and personal finances for we only have one goal in mind and that’s to help you achieve your financial dreams.


In today’s video we will be talking about the things to consider when planning your retirement. But before we dive into this topic let’s check if you have subscribed to our channel. If not please hit the subscribe button in the bell icon to get notified whenever we post. 


Now let’s get this money talk started. If you want to maintain your lifestyle after you retire. you need to have enough money available that will last for the rest of your life. And one of the keys to having no money-related worries during your retirement is by building a retirement fund. 


Now, what is a retirement fund and how do we start building this fund? A retirement fund is basically the fund that is kept aside or saved during one’s working life specifically for the purpose of being used as an income source during post-retirement.


Let’s say you are in your 40s and plan to retire by age 65. That would mean that you have another 20 to 25 years left to save for your retirement. Considering that the average life expectancy of adults is 85 to 90 years, you will need enough money that will last for 20 to 25 years to empower you with a decent retired life for the rest of your life.


During your working life depending on your age and earnings you can plan to set aside a fixed amount every month as savings towards your retirement fund. If you are in your 20s, you may be able to put aside $500 every month towards your retirement. Assuming a person is 25 years old and plans to retire by age 65, he or she has 40 years to save towards retirement. 


That means, $500 savings per month * 12 months * 40 years = $240,000.


That’s it, $240,000. Now how can someone live for another 20 to 25 years with only $240,000 in retirement savings? 


To be honest, no one can. Then why save this money? The trick is to invest rather than save. If you invest $500 per month for 40 years, you could have $1.5 Million or more in your retirement funds depending on your investment vehicle. 


It will now be possible to live comfortably for the rest of your life on this $1.5 Million. The crucial point here is investment vehicles. In addition to the magic of compound interest, the rate of return is at work here.


Over the last 15 years stocks have delivered consistent annual returns of 7 to 10 percent. Real estate investing is another type of investment. And of course using 401K investment options will be critical. To top it off there is a good chance that we will still receive social

security benefits if the system is not bankrupt by the time we retire. 


After establishing your funds, you must also consider some of the factors that may have an impact on your retirement fund. The cost of goods could be much higher than it is now. We refer to this as inflation. Inflation is the overall increase in the cost of goods and services caused by the depreciation of the currency.


According to the consumer price index, inflation rate has risen by two percent to three percent per year over the last few years. Furthermore, the annual inflation rate

for medical aids ranges between two percent and five percent. The impact of inflation is extremely important as you plan for retirement. Specifically, it helps determine the

amount you would need to have available during retirement years. 


And, very often changes in income and expenditure patterns are at the mercy of rising inflation. While preparing for a beneficial post-retirement life, a blind eye towards inflation can lead to staggering alterations in your plans.


Another factor to consider for your retirement plans would be taxes. Along with inflation, the cost of income taxation also rises over time. You might be wondering whether you have to pay taxes during retirement. It is a fact that for every income there is a tax that must be paid. You would almost certainly have taxes on most accounts after retirement either from investment activity or from taxed withdrawals.


Don’t forget to count taxes during planning as it may lead you towards extreme unexpected shortfalls. Take note that certain investment accounts such as 401Ks do not have an early withdrawal penalty if you begin withdrawing after the age of 59.5. 


However, you would still be required to pay income taxes on the amount withdrawn. Most folks’ primary source of income after retirement will be investment withdrawals or pensions. However, proper budgeting is required so that this income can help you meet your daily survival needs.


How to have an effective budget during retirement?


Similarly to how we should use budgets during our working lives, we must also ensure that the money we have during retirement will last for the rest of our lives. Proper and effective budgeting is extremely important. 


In fact, visualizing expenses as a non-retired individual can help you determine the reasonable amount that will be required for post-retirement. After you account for taxes and inflation you then can calculate how much money you’ll need each month to live comfortably in retirement. One can begin by evaluating spending on dining out groceries, medical and fuel. 


Among other things to determine how much a person requires and how much expenditure is unnecessary as needs and expenses change over time. Having a good idea of what we need and want makes a big difference and it’s a good idea to create a retirement budget for that. Making it a habit to discuss these plans with your significant other peers and family members will reveal and clarify a variety of thoughts and perspectives on financial needs in retirement. After all is said and done, a good income makes everything possible.


Sources of income are just as important as income itself both during your working and retired lives. If you have a single steady source of income during your working life you can eventually become rich by implementing smart investment strategies. However, if you can generate income from multiple sources, you can not only become rich but also become wealthy. How? With a single source of income there isn’t much left over after deducting for

taxes and the cost of living. 


However, if you have multiple sources of income, you will have more than enough left for investments. Similarly, even in retirement, you can earn money from a variety of sources. The key is to become a wise investor during your working years and invest in a variety of investment vehicles so that when you retire you have multiple income streams.


Now we are down to the last on our list to consider for your retirement planning. 


How to maintain vigilance over retirement accounts?


When it comes to retirement savings, it is always good to overestimate how much you will be needing during retirement. Most of the time people forget or they just can’t find time to be on track to save enough before retirement. So, it is recommended that you have a word or two with an investment advisor once in a while to keep a close check on your online account or keep a watch on your retirement account.


We recommend that you use MoneyPatrol to closely track all your investment accounts and keep monitoring your portfolio often to ensure that you are on track to achieve your retirement money goals. It is an invaluable tool that will assist you in fully comprehending, managing and monitoring your finances. 


Now that you have an idea of what to consider in planning your retirement, do you still think that your post retirement plans should be at the mercy of your current income? 


Let’s summarize everything we’ve learned in this MoneyTalk. We covered six things you must consider for your retirement planning –


  • How to build a retirement fund?
  • How inflation impacts retirement plans?
  • Do we have to pay taxes during retirement?
  • How to have an effective budget during retirement?
  • How to assess the sources of income generation during retirement?
  • How to maintain vigilance over retirement accounts?


But, most importantly, if you are serious about money and personal finances, the wisest thing to do is to invest in tools such as MoneyPatrol.