Steps to Assure Your Retirement Plan is Ready for Anything

If there is one thing any person who works full-time is looking forward to, it is retirement. In fact, 55% of Americans' savings accounts are strictly geared toward money for retirement. Most workers also have a retirement plan through their jobs, and even private stocks or IRAs.

If you count yourself among this group of Americans, are you really sure your retirement plan is ready for anything?  You should be proud of the fact that your retirement savings account, work-related retirement plan, and stocks or IRAs--if you have them, and you really should--are steadily growing.

However, we all know how life works. John Lennon said it best, "Life is what happens to you while you are making plans." Barring unseen disaster or other circumstances beyond your control, if you keep on the path of savings you have designed for yourself, retirement is going to be a beautiful, financially secure event in your life.

Steps to Assure Your Retirement Plan is Ready for Anything

Even though you have a solid financial plan in place for retirement, it is important to give your retirement strategy a stress test of sorts while things are still going along at an even keel. To help you do this, the Rules of Thumb blog from MoneyThumb would like to offer our cherished readers a short guide to help you make sure your retirement plan is ready for anything. Here they are:

1. Take stock of where you stand now--Pull together the current balances of any money you have geared toward retirement. Include your 401(k)s, IRAs, other company savings plans, and savings earmarked for retirement that you have. Then calculate the percentage of your gross annual income that you save in a 401(k) or other workplace plans (including any company matching funds) and note the dollar amount that you stash in investments outside your workplace plan.

2. Plug this information into a retirement calculator--A good retirement calculator employees Monte Carlo-type simulations to allow for the variability in investment returns. Among the free online calculators are, T. Rowe Price’s Retirement Income Calculator and Fidelity’s Retirement Quick Check. You will also want to include an estimate of the age you intend to retire, your projected Social Security benefit, and the percentage of your salary you need to maintain an acceptable standard of living in retirement. As for the percentage of pre-retirement income you’ll require, anywhere between 70% to 90% is a credible estimate. You can get your projected Social Security benefit by going to Social Security’s Retirement Estimator.

3. Follow through and periodically reassess--Retirement planning isn’t something you do once and then forget about it.You’ll need to periodically assess your progress and make adjustments to stay on track. When you’re within 10 years of your anticipated retirement date, if you find that you have not accumulated enough resources to allow you to retire on schedule and lead the lifestyle you’d like, then it is time to reassess your retirement plan. You may find the need to work for a few more years, take a part-time job after you retire, or cutting back on the type of lifestyle you lead.

We at MoneyThumb and the Rules of Thumb blog really want our readers to be able to retire with ease when the time comes. By following the above steps, you can get much closer to making this happen.