ETF Trends
ETF Trends

Sticker shock — the uncomfortable realization that the cost of an item exceeds your expectations or ability to pay — is not the feeling you want to have as you ready for retirement.

Obviously, there’s no price tag on retirement. Commonly accepted estimates say you’ll need to replace 80% of your present-day income to live comfortably in your golden years; but that’s just an estimate and everybody’s situation is unique. Let’s just say, retirement is a whopper of an expense. Hopefully, though, it’s one you’ve been planning for.

Still, even the most diligent planners, savers and investors may feel unsure of exactly how much their retirement will cost them, not to mention how to go about drawing down their savings to pay for it. But when you consider that your retirement could last 25 years, or longer, you want to feel confident that your assets can cover your liabilities for the duration. Sticker shock is not an option.

Following is a three-step plan to help you organize your thoughts and clarify your retirement-cost reality.

Step 1: Identify your retirement goals

The first step in determining how much your retirement might cost is to pinpoint your goals. What does retirement mean to you?

Your basic financial goals may include having the ability to pay your bills for the rest of your life, maintaining your lifestyle, establishing a cushion for unforeseen expenses or maximizing your estate to leave a legacy for your heirs and/or a charity. Be sure to factor in other goals that come with financial costs, such as funding advanced education, starting a business or providing for extended family. This is also the point where you should dream: Will your retirement include exotic vacations, a boat? Make sure it’s on the list.

Step 2: Itemize your anticipated expenses

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