How To Manage Your Retirement Planning Spreadsheet
If you’re trying to figure out how much money you’ll need to save for your retirement, then one of the most useful tools to have on hand is a spreadsheet program that can help you automatically calculate the numbers for you. All you’ll need to do is program each cell based on what your income and investment figures happen to be and your spreadsheet will automatically populate the figures you must achieved.
Many retirement specialists recommend using Microsoft Excel for this need. There are other software programs that are free, including Open Office, that are equally as good if you don’t have the cash right now to spring for an MS Office product.
You Have Two Basic Calculations To Do
If you’re planning your retirement right now, then there are two basic calculations that you’ll need to consider right now.
- The amount of income that you want to have after you retire.
- How much money you’ll need to save/invest in order to reach that level of income.
People are living longer than ever today. When Social Security was first implemented, the retirement age of 62 was older than what the average person would actually live to be. At 65 today, the average man will live another 17 years and the average woman will live another 20 years. Those are the minimums that your retirement planning spreadsheet should be helping you achieve.
Once you’ve achieved these two figures, you’re ready to plug some numbers into your spreadsheet. Here are the primary figures you’ll want to keep track of on a regular basis.
- Your annual income percentage that you contribute to your retirement.
- The overall balances of all of your savings and retirement accounts.
- The percentage of growth that you anticipate having every year.
When you know what your target amounts happen to be, then you’re ready to figure out how to get there. If you need $100,000 per year on which to live on after retiring, then women will want to plan on having $2 million as a nest egg. A husband and wife would want $3.7 million in total for their retirement. That number can seem daunting, but it really could be achievable today.
You Don’t Need $3.7 Million On the Day You Retire
You don’t need a lump sum available at retirement. You just need to create an income ladder that will give you the income that is needed. Here’s how to do that: let’s say that you’ve got $10,000 right now. With 10% compound interest or dividends, in 30 years, that will be worth over $170,000. If you’re 35 and planning to retire at 65, that’s the perfect amount for you to begin saving this year. Then you’ll build an investment ladder that can be used every year of your retirement.
Obviously those who have fewer years to retirement will need to be more aggressive. Even at 50, however, a 30 year ladder can still be installed and give you viable income that can compound on itself starting at your retirement age. It all starts with a retirement planning spreadsheet that you create and update on a regular basis. Start one today and get yourself on track for retirement.
Our Retirement Planning Worksheet
Did you know that 2 out of every 3 Baby Boomers haven’t saved enough for retirement yet? For the younger generations, more than half of all American households don’t even have a savings account. You can start saving for your retirement with as little as $25 per month right now and potentially wind up with millions if you have 30 years with which to work. This retirement planning worksheet will help you accomplish your goals.
By completing this retirement plan worksheet, you’ll be able to understand 3 very important things:
1. How your savings are likely to grow in the future.
2. Whether you are on track to be able to retire in the way you want.
3. The amount of money that will need to be saved between now and you’re retirement date.
The calculations are rather simple. Here is the worksheet to use:
1. List you current gross annual income: $_______________ [i.e. $75,000]
2. Multiply by the percentage you will need: _____________% [i.e. x 80%]
3. The amount you will need each year after retirement: $____________ = [i.e. $60,000]
4. Subtract other sources of income, like Social Security -$_____________
5. The amount you will need to take from your savings annually $_____________
6. The amount you must save by your retirement date: $_____________
Your Current Investments Matter As Well
If you have investments that are already working to help you earn your retirement, then these need to be included in your retirement planning worksheet. Anything that is classified as a retirement account or a brokerage account is included in this figure.
IRA accounts, including Roth IRAs
Employer-sponsored retirement plans, such as a 401k or a 403b.
Investment accounts for stocks, bonds, or mutual funds
List the amounts that you currently have.
IRA accounts: $_____________
Employer-sponsored plans: $_____________
Other investment accounts: $_____________
Total current balance: $_____________
Now you’re going to need to estimate what the value of your accounts are going to be worth by the time you retire. Estimate the return that you’re going to receive on your investments [generally 4-10% is what most accounts achieve on an average annual basis] to determine how much they’ll be worth. This is where starting early really helps. For someone who has 35 years to their retirement, an annual 10% gain will make their total current balance be 28.1x more than what it is today as an estimate.
Take the total current balance and your estimated growth [4%], multiply it the percentage, then add the amount to the current balance. Then repeat for the number of years you have left until you retire.
Combine these two worksheets, calculate your returns, and you’ll know how much money needs to be saved and invested so you can retire in style. Keep in mind that the biggest gains aren’t achieved for 20 years at minimum, so if you only have 1-5 years before your retirement, you will want to invest as aggressively as you are comfortable doing to make up some lost time. Try an allocated spending plan Excel or Word-made that might help.
With this retirement planning worksheet, you’ll get the solid figures you need. Use it today to your advantage and you’ll know what you need to do today to retire when you’re ready.