Steps to Creating a Well-Organized Retirement Plan

Creating a retirement plan can be a daunting task as it involves forecasting. You need to consider your future income, savings for retirement, your assets and your debt. To create your pension plan, you need to do the following:

Step 1: Work on Your Retirement Strategy Now

Here are some retirement planning strategies you should be working on already. If you haven’t implemented any of these yet, get started now:

·         Maximize your monthly pension contributions and take advantage of your employer offers to match contributions.

·         Ensure your estate is in order. To ensure your family is taken care of, have a living will in place.

·         Ensure you have the right insurance policies in place.

·         Ensure you have adequately estimated your post-retirement monthly income as well as what your needs will be. A common estimate is that you will need 70 to 90 percent of your pre-retirement income to maintain your standard of living when you stop working. 

Step 2: Know What You Have

Identify and list all that you own. This will comprise amounts you have in the following:

·         Regular bank accounts: This includes savings and current accounts, fixed deposit accounts, money market accounts, etc.

·         Pension funds: This includes all balances you may have in your employer-provided retirement scheme and/or your Individual Pension funds held.

·         Business market value (or income generated by business): If you own a business that you intend to sell after you retire, you’ll want to determine its net market value. If you intend to keep your business going, determine the average net income you receive from it.

·         Real estate market value (or rental income generated by real estate): If you intend to sell your properties after you retire, list them out and estimate their likely sale price. Ensure to subtract any amounts you still owe for the properties to get their net value. If you intend to keep your properties, determine the average net income you receive from them.

·         Other investments: List all your investments and call for their current market values. You may decide to liquidate some or all of your investments when you retire or keep them if they can provide you with sufficient passive income.

·         Life insurance: If you bought any life insurance policies other than term life, you may have some cash benefits due to you. List all your cash value policies and dates they fall due.

Step 3: Know What You Owe

Identify and List all that you owe. This will comprise amounts you have in the following:

·         Consumer debt: This includes any car loans, personal loans, Sacco loans etc. you have outstanding.

·         Home mortgage debt: If you will still owe money on your home after you retire, note the amount outstanding.

·         Business debt: This is any debts you have outstanding in your business.

Step 4: Know Your Retirement Lifestyle Plans

This may be difficult to determine, as our plans often change over time.  However, you know what you enjoy and what’s important to you, so, you should have an idea of how you want to spend your retirement.

Take some time to consider your retirement needs and goals and factor in possible inflation. Some things you should include in your future expense planning are the cost of housing, medical fees, day-to-day expenses, and insurances. After these basic costs, you can then include your additional goals such as travelling, pursuing your hobbies, philanthropy, etc.

If you begin to plan for this lifestyle now, you will be able to make adjustments to your investment strategies to ensure you can retire in the manner you desire.

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