Financial Independence

Many financial planning experts believe that retirees will need anywhere from 60-80 percent of their pre-retirement gross income to maintain their standard of living during retirement. If the spending need used in preparing projections represents a much smaller percentage of current income, the projection will be enhanced. However, the projections may be depicting a substantial reduction of the retiree’s standard of living in retirement.

The significance of financial independence planning:

1. It is necessary for every individual and family to prepare for a point in the future at which earnings may end.
2. Financial independence means the ability to meet your desired cost of living expenses for the remainder of your life with the financial resources you accumulate, plus any supplemental sources of income such as social security or pension.
3. Planning for financial independence and retirement involves the analysis of how your future projected resources measure up against your future projected spending needs. This analysis is never finished due to the continuous changes caused by inflation of costs as well as additions to our savings and investment base.
4. Because numerous factors can change your financial independence picture as time goes by, the significance of retirement projections is directly related to your proximity to retirement. If your retirement age is within the next few years, the projects should be very realistic. Otherwise, you should expect the future amounts to vary from long-term projections.

Several factors can be combined to improve retirement projections if it seems financial security in retirement is not assured. One or more of the following steps may be necessary:

• retirement savings increased
• retirement postponed
• part time employment may be considered during early retirement
• assets can be repositioned for better annual returns
• retirement spending reduced