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Calculating a retirement figure

10/12/11

A number of stages of analysis can adequately inform a person of just how much savings he or she needs to comfortably retire, according to the New Brunswick Business Journal, but simply calculating living expenses and potential medical costs is only part of the process.

Ideally, people want to eliminate as much debt as possible before they retire. The source notes that debts and mortgages can be a serious burden for retirees regardless of cost of living calculations and any subsequent savings. A 30 year old worker, for instance, who wants to begin planning for retirement should start by paying off debts before he begins to calculate just how much he will need to invest in his 401(k) plan.

Once debt is taken care of or at least managed comfortably, potential investors can take into account both expenses that will likely be eliminated when they retire as well as those expenses that will likely increase. Children may become self sufficient, for example, but a spouse's prescriptions and medical bills may become a more significant factor in the monthly budget.

Proper financial planning often also involves addressing unpleasant but potential eventualities. According to the National Center on Caregiving, about 10 million Americans required some form of long term care in 2000, a number that is expected to continue to rise. While it's difficult to confront, it can be much less of a burden if it is addressed financially early on in retirement. 

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