by D. Victor

Created on: December 16, 2008   Last Updated: December 03, 2009

Only a few persons would argue against the notion that it is important to prepare for retirement. Indeed, the majority would understand the importance of planning for retirement. However, knowing what to do, knowing how to do it and actually doing it are three different spheres.

Everyone might prepare for retirement in a different way. For those close to retirement, preparations would be financial, social and psychological. Those who have some years to go could afford a one-dimensional focus on retirement (finances). However, to prevent retirement planning from becoming retirement panicking, you have to know how to go about it.

1) Assess your financial status

Even if you have already started planning for retirement in earnest, you need to review your retirement plans and your overall financial health. If you are saddled with debt, this would most likely affect your plans. Assessing your situation is necessary before you proceed. You also have to know and understand what happening with your existing retirement portfolio. After all, retirement planning is a function of financial planning.

2) Create your retirement vision

You should literally dream about your ideal retirement. While you have some latitude with dreaming, do not hope for pie in the sky. The reality check would be your finances, resources and your willingness to sacrifice if necessary.

3) Set your retirement goals

Your retirement goals will translate your dreams to measurable targets. When you set your goals, you would have a time frame in mind. You should also have an idea of what your retirement dreams would cost. Then you'll be able to set definitive targets in terms of an accumulated retirement fund and your income stream (pension/annuity payout).

4) Compare where you want to be to where you're at

Suppose that your lifestyle requirements dictate that you need $2,000,000.00 in 20 years. If you currently have only $100,000.00 saved for retirement, then you will determine through a simple financial calculation how much more you will need to reach your target at a given accumulation rate.

5) Factor in inflation and a retirement period of 30 years

Increased life expectancy, contingent expenses, fixed income and the consequences of an increasingly higher life expectancy are just part of the reality of retirement. If you do not fully cater for it, you may be residing happily in fool's paradise. You'd only moan and despair when you realise that your target income was too low or that you failed to account

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