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Retirement planning is no simple task. The scariest evidence supporting this is the amount of people that simply do nothing when faced with such enormous decisions and extreme uncertainty. To be able to accurately plan for your retirement you need to make a lot of decisions that can greatly change how much you need to save for retirement and will greatly affect the outcome of your plans. So, let’s dive into the variables that make retirement planning difficult.
When to Retire and How Long Will You Live?
These two questions are a key planning step in your retirement plan. You need to determine these two factors so you know how many years of income you will need in retirement. Keep in mind that you might end up having to retire before you plan to due to disability or a poorly timed recession that leads to a lay off a few years before you retire.
On the other end of the spectrum, people are living longer every day. Hopefully you’ll live a long and healthy life but keep in mind if you live longer than you expect to you may run out of money. Determining how long you expect to be in retirement is no easy task but I estimate a bit longer than I expect just in case.
There is a way to avoid this step but that involves having a pension or an annuity. If you go the route of an annuity make sure you know all of the details and shop around for the best one with competitive annuity rates.
How Much Income Will You Need?
To determine how much income you will need you have to know what type of lifestyle you will want to live. After you decide on a retirement lifestyle try to estimate what your expenses will be in terms of a percentage of your income. Many retirement calculators ask you to input this percentage as a base for your calculations. Keep in mind that you will no longer have to save for retirement when you retire and hopefully you won’t be working and won’t have to pay payroll taxes anymore.
How Will Inflation Erode Your Savings?
This, like most questions relating to retirement, is a tough question because no one can see the future. There have been times of almost no inflation and times of relatively high inflation. Most calculators I’ve seen use a default inflation rate of 3%. You must remember this is an average inflation rate from now until you die so use a number that you feel will account for the the times with high, low and normal inflation.
How Will Your Investments Perform?
There are two investment performance time frames you will likely need to input. You will need to know how much you expect your investments to perform before you retire and how much you expect your investments to return after retirement. Keep in my that after you retire you’ll likely need to be more conservative with your investments so your rate of return will likely be lower in retirement. You don’t want to lose a big chunk of your nest egg if the economy starts to falter and your investments follow.
Planning for retirement is no simple task but breaking it down into steps makes it a much more manageable and definitely helps. After you feel you have a good grasp on these questions plug your answer to these variables into a retirement calculator and see how much you need to be saving to reach your goal. Work toward that amount and you’ll be on your way!
If this is all too much or you don’t feel comfortable with your answers you could always consult a fee only financial planner. Just don’t be like the people paralyzed by the unknown. Do something today and prepare for your retirement.
An accountant by day and blogger by night, Lance is the owner of this site. 
