We’ll evaluate the results of your calculation toward your retirement goal.
Did you find out that you’re ahead or behind? Let’s evaluate both.
If you’re ahead of the game and can easily retire when you want, it’s time to begin playing with the numbers:
- You could choose now to retire earlier, re-running the numbers to find out how much earlier.
- You could save less money toward this goal, especially if you’ve got Cornerstone 2 needs or Cornerstone 3 goals you’d like to fund.
- You could back down the risk you’re taking. Maybe you feel like you’re pretty aggressive. You could set your sites on a lower interest rate.
See how powerful it is to have yesterday’s data? Now you’re in the driver’s seat.
…even if you’re behind.
The options aren’t as pretty, but you still have options. Let’s review them:
- Dedicate more money to offset your shortage. If you have discretionary income that you freed up from our early budget lessons, you could apply that money to your retirement goal. You could also ax some short-term goals if they aren’t as high a priority.
- You could retire later.
- You could notch up the return that you’ll expect from your investments. If you pursue this route, realize that there’s a diminishing chance you’ll actually achieve your goal. At some point you take so much risk that your investing becomes betting instead.
Work through tweaking your numbers so that you have a plan you like.
You should end up with three pieces of data:
- How much you need to save for retirement
- What return you need
- When you’ll achieve your goal if it works out the way you want
It’s #3 that gives us trouble…while you now have a target that will help us choose investments, now you’ll have to stay on top of whether you’re actually achieving those results. Much like a pilot of an airplane, you’ll have to make adjustments every year to make sure the goal is still in reach. The good news? You can now see (I hope) that this is WAY easier than you’d thought. It’s a lot of information, but NOT the overwhelming mess you’d envisioned).
Do the same with all of your goals. What return do you need? How much do you need to save for each?