Fillable Printable Financial Planning for Retirement Workbook
Fillable Printable Financial Planning for Retirement Workbook
Financial Planning for Retirement Workbook
Purdue extension
Consumer and
Family Sciences
CFS-685-W
Department of
Consumer Sciences
and Retailing
Financial Planning for
Retirement Workbook
Financial Planning for Retirement Workbook • CFS-685-W
Purdue extension
• Introduction
3
• Your Retirement Lifestyle
3
• Your Current Financial Situation
4
• The Inflation Factor
7
• Changes in Spending Patterns
After Retirement
8
• Planning for Future Inflation
8
• Planning for Large Future
Irregular Expenses
8
• How Much Are You Worth?
11
• Estimating Retirement Income
11
• Where to Go for Information
18
• Balancing Income with Expenses
18
• Increasing Income
18
• Reducing Expenses
22
• Medicare and Other Health Insurance
22
• Housing Expenses
23
• Looking Ahead
23
• References
25
• Credits
25
Financial Planning for Retirement
Workbook
Revised and updated by Janet C. Bechman, Purdue Extension specialist, and
Barbara R. Rowe, Utah State University Cooperative Extension specialist,
based on North Central Regional Extension publication 264 by Irene Hathaway,
Michigan State University
Worksheets
Worksheet 1 – Your Retirement Lifestyle
5
Worksheet 2 – Estimated Annual Cost
of Living 6
Worksheet 3 – Estimated Changes in Spending
After Retirement 9
Worksheet 4 – Estimated
Annual Cost of
Living 10 Years After Retirement 12
Worksheet 5 – Large Future Irregular
Expenses 13
Worksheet 6 – How Much Are You Worth?
14
Worksheet 7 – Estimated Annual Income
After Retirement 19
Worksheet 8 – Estimated Annual Income
10 Years After Retirement 20
Worksheet 9 – Monthly Cost of Living
Worksheet 24
Tables
Table 1. The Inflation Factor
7
Table 2. Expectation of Life by Age
and Sex
10
Table 3. Age to Receive Full Social
Security Benefits 15
Table 4. Benefit Increases for
Delayed Retirement 16
Table of Contents
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Financial Planning for Retirement Workbook • CFS-685-W
Introduction
Are you looking forward to the day you retire?
To having more time to travel, spend with family
and friends, enjoy new hobbies, or increase your
volunteer work? Or does the thought of retirement
make you slightly uneasy; unsure if you will have
enough money to stop working, but not knowing how
much you need to save? Being able to retire when
you want and living comfortably is a dream for many
Americans, and the goal of this workbook is to help
you reach it.
The biggest question is, when the time comes
to stop working, will you have enough income to
continue the lifestyle you had before retirement? That
depends on the lifestyle you want to maintain and
the types of income you will have. Social Security
payments alone will not be enough for most of us. In
2009 the maximum Social Security monthly benefit
payable to a worker retiring at age 66 was $2,323,
while the average monthly benefit was $1,153
(www.ssa.gov/pressoffice/factsheets/colafacts2009.htm).
As you plan, keep in mind that the average
American life expectancy is 74.7 years for men and
80.0 years for women.
1
The “average” person who
retires at age 65 looks forward to another 16 to 20
years of life. Many of us will have even more years. It
is never too early to begin planning how you want to
spend those years.
When you think ahead to retirement, here are some
questions to answer:
1. What lifestyle will you want during retirement?
2. What is your current financial situation?
3. How will your financial situation change at
retirement?
4. How can you control your financial future to be
able to retire with the resources needed to achieve
your desired lifestyle?
See how your retirement picture might look by
following the steps in this workbook, filling in the
worksheets, and doing the calculations. No one can
predict the future exactly. However, projecting from
what you know now will give you an estimate of what
to expect in the future.
1
Source: National Vital Statistics Reports, Vol. 54, No. 14,
April 19, 2006 Retrieved from www.cdc.gov/nchs/data/
nvsr/nvsr54/nvsr54_14.pdf
Your Retirement Lifestyle
As you think about your retirement days, how will
you want to live? What type of lifestyle do you hope
for? Will you have enough money to support that
lifestyle? What will be important to you and what
won’t be? How will your life and expenses change
after retirement? Here are some items to consider:
• Your home —Where will you live? Changing your
housing or moving to a different part of the state
or country, or to another country, can increase or
decrease your expenses. Even if you plan to “stay
put” in the same house, some of your costs will still
change. For example, your heating and light bills
may increase if you spend more hours at home. Or
they may decrease if you spend more time traveling
away from home. As your home ages, it will need
more repairs and maintenance.
• Transportation — What does it cost you now?
How much of your transportation costs (gas, car
maintenance, bus or train fares) are for travel to
and from work? Will you keep your own car, rely
on public transportation exclusively, or use some
combination of the two?
• Food — Will you eat out more often in retirement,
or entertain friends and family more often? How
much do you pay a year for lunches or other meals
eaten at work?
• Clothing and personal care — How much of your
present clothing costs are for special clothing for
your job? How much is for more expensive clothing
than you will need after retirement?
• Health and medical expenses — Will you buy
insurance to supplement Medicare gaps, or will you
be paying for all your health care insurance until
you are age 65? Will you buy exercise equiment,
or join a health club, or cancel a health club
membership?
• Entertainment — Will you spend more or less on
movies, books, theater, clubs, shopping?
• Hobbies — Will you spend more money on
hobbies, such as woodworking and gardening?
• Recreation — Will you spend more money on
leisure activities, such as golfing and fishing?
• Travel — Will you increase your travel during
retirement?
After you retire, you may spend more in certain
categories such as health care and health insurance.
Financial Planning for Retirement Workbook • CFS-685-W
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You also may spend more on travel, entertainment,
and leisure activities, because you have more time to
enjoy them.
Use Worksheet 1, “Your Retirement Lifestyle”
(page 5), to describe the lifestyle you desire during
retirement. As you dream about your retirement
days, will you be able to afford the lifestyle you find
desirable?
Your Current Financial Situation
As you plan for your retirement years, it is helpful
to look at what you are spending now to live. Use
Worksheet 2, “Estimated Annual Cost of Living”
(page 6), to record what you spend annually in each
category. If you only have monthly expense figures,
turn to the “Monthly Costs of Living,” Worksheet
9 (page 24). Record your monthly expenses and
multiply by 12 to get the annual figures to put on
Worksheet 2.
Note: The sample “Estimated Annual Cost of
Living” worksheet on this page is meant to serve as
a guide as you fill in your Worksheet 2. It is based on
this scenario:
a) Mr. and Mrs. Jones would like to retire at age 62,
11 years from now.
b) They guess that the inflation rate will rise slowly
and will average about 5 percent a year.
c) 11 years at 5 percent = 1.71 inflation factor (from
table on page 7).
d) Their estimated current annual expenses of
$32,277, multplied by the inflation factor of 1.71,
shows they will need $55,194 in their first year of
retirement to maintain their current lifestyle.
Example: Estimated Annual Cost of Living
Totals You
Spend Now
Inflation
Factor
Future Budget at
Time of Retirement in
11 years
Housing
$9,956 1.71 $17,025
Household operation and maintenance
$2,230 1.71 $3,813
Automobile and transportation $6,016 1.71 $10,287
Food $4,518 1.71 $7,726
Clothing $1,782 1.71 $3,047
Personal $1,521 1.71 $2,601
Medical and health $1,665 1.71 $2,847
Recreation, education $1,659 1.71 $2,837
Contributions $738 1.71 $1,262
Taxes and insurance $1,112 1.71 $1,902
Savings, investments $780 1.71 $1,333
Irregular expenses
(ex. gifts, license plates, holiday spending,
etc.)
$300
1.71
$513
ANNUAL TOTAL $32,277 1.71 $55,194
Adapted from Planning a Retirement Budget, a CEH Topic, Hogarth, Cornell University, 1984.
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Financial Planning for Retirement Workbook • CFS-685-W
Worksheet 1 – Your Retirement Lifestyle
What will your lifestyle be like during retirement? Beside each item listed below, describe what you
really want in retirement.
1. Your home:
2. Transportation:
3. Food:
4. Clothing and personal care:
5. Health and health care:
6. Entertainment:
7. Hobbies:
8. Recreation:
9. Travel:
From Retirement Planning, DP-CFR-051, Maddux, University of Georgia CES, 5/96.
Financial Planning for Retirement Workbook • CFS-685-W
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Worksheet 2 – Estimated Annual Cost of Living
Fill in the first column with what you are now spending annually to live. Then figure the
Inflation Factor by following the steps listed above the Inflation Factor table on page 7. Fill
in the inflation factor in the second column. (You may do this only for the total, or for each
category of costs.) Multiply column 1 by column 2 to get an idea of the income you will need
during your first year of retirement.
Totals You
Spend Now
Inflation
Factor
Future Budget at
Time of Retirement
in ____ years
Housing $ $
Household operation and maintenance
$ $
Automobile and transportation
$ $
Food
$ $
Clothing
$ $
Personal
$ $
Medical and health $ $
Recreation, education
$ $
Contributions
$ $
Taxes and Insurance
$ $
Savings, investments
$ $
Irregular expenses
(ex. gifts, license plates, holiday spending,
etc.)
$
$
ANNUAL TOTAL $ $
Adapted from Planning a Retirement Budget, a CEH Topic, Hogarth, Cornell University, 1984.
Purdue extension
Financial Planning for Retirement Workbook • CFS-685-W
The Inflation Factor
Inflation is a widespread and sustained increase
in the general price level of goods and services.
Economists say that when prices go up 3 percent
or more a year, the country is in a state of inflation.
While just about everyone gets hurt by inflation,
people who live on fixed incomes may feel the
crunch more than others because prices rise but their
income doesn’t. Increases in inflation rates have been
extremely modest in recent years – between 2 percent
and 4 percent. But even a 2 percent increase every
year will have a cumulative effect, and prices will be
higher in the future than they are now. That’s why it
makes sense to build inflation into your retirement
plans.
On Worksheet 2, “Estimated Annual Cost of
Living,” you filled in the first column with the cost
you calculated for each of the expense categories
listed. To fill in the second column, use Table 1, “The
Inflation Factor” (on this page).
(1) Choose the number of years until your
retirement starts from the “Years to Retirement”
column on the left of Table 1.
(2) Then select an estimated annual inflation rate
from the row across the top. Inflation cannot be
predicted from year to year. In 1980, it was 12.4
percent. In 2001, it was 1.6 percent. In 2007, it was
4.1 percent. You have to make an educated guess.
(3) Read across and down to find the appropriate
inflation factor corresponding to your predicted rate of
inflation. For example, 10 years at 6 percent inflation
gives a factor of 1.79.
(4) Multiply your estimated annual cost of living
expenses from the first column of Worksheet 2 by the
inflation factor to get an idea of the amount of income
you will need for your first year of retirement, if you
want to maintain your current lifestyle. (Example:
$14,000 x 1.79 = $25,060.)
Table 1. The Inflation Factor
Years to
Retirement
Annual Inflation Rate
2% 3% 4% 5% 6% 7% 8% 9% 10% 11%
1 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11
2 1.04 1.06 1.08 1.10 1.12 1.15 1.17 1.19 1.21 1.23
3 1.06 1.09 1.13 1.16 1.19 1.23 1.26 1.30 1.33 1.37
4 1.08 1.13 1.17 1.22 1.26 1.31 1.36 1.41 1.46 1.52
5 1.10 1.16 1.22 1.28 1.34 1.40 1.47 1.54 1.61 1.69
6 1.13 1.19 1.27 1.34 1.42 1.50 1.59 1.68 1.77 1.87
7 1.15 1.23 1.32 1.41 1.50 1.61 1.71 1.83 1.95 2.08
8 1.17 1.27 1.37 1.48 1.59 1.72 1.85 1.99 2.14 2.30
9 1.20 1.31 1.42 1.55 1.69 1.84 2.00 2.17 2.36 2.56
10 1.22 1.34 1.48 1.63 1.79 1.97 2.16 2.37 2.59 2.84
11 1.24 1.38 1.54 1.71 1.90 2.11 2.33 2.58 2.85 3.15
12 1.27 1.43 1.60 1.80 2.01 2.25 2.52 2.81 3.14 3.50
13 1.29 1.47 1.67 1.89 2.13 2.41 2.72 3.07 3.45 3.88
14 1.32 1.51 1.73 1.98 2.26 2.58 2.94 3.34 3.80 4.31
15 1.35 1.56 1.80 2.08 2.40 2.76 3.17 3.64 4.18 4.78
16 1.37 1.61 1.87 2.18 2.54 2.95 3.43 3.97 4.60 5.31
17 1.40 1.65 1.95 2.29 2.69 3.16 3.70 4.33 5.05 5.90
18 1.43 1.70 2.03 2.41 2.85 3.38 4.00 4.72 5.56 6.54
19 1.46 1.75 2.11 2.53 3.03 3.62 4.32 5.14 6.12 7.26
20 1.49 1.81 2.19 2.65 3.21 3.87 4.66 5.60 6.73 8.06
From Financial Planning for Retirement, NCR-264, Field and Hathaway, Michigan State University CES, 5/87.
Financial Planning for Retirement Workbook • CFS-685-W
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Changes in Spending Patterns
After Retirement
After you retire, you may spend less on certain
categories, such as taxes (income taxes are usually
lower, and you may not pay Social Security
taxes, although some retirees do) and savings and
investments (you probably won’t contribute to a
pension fund, although you still will need a savings
plan).
Income tax
How much did you pay last year? Compare that
amount with the taxes for your estimated retirement
income. Use the table in last year’s 1040 form. About
one third of people who get Social Security have to
pay taxes on their benefits. This provision affects only
people with substantial income in addition to their
Social Security benefits. Pension or annuity payments
from an employer’s retirement plan may be subject to
income taxes.
Social Security taxes
If you continue to work after you begin drawing
your Social Security benefits, you will have to pay
Social Security and Medicare taxes on your earnings.
In 2009, the combined tax rate was 7.65 percent for
an employee and 15.3 percent for a self-employed
person. You do not have to pay Social Security or
Medicare taxes on your Social Security income.
Check your paycheck stub for the amount you paid
into Social Security last year. Compare it with the
expected amount of your post-retirement income.
That will tell you whether you will need to pay Social
Security taxes after retirement and how much they
will be.
Saving and investing in retirement
Check your paycheck stub for contributions to
a pension plan. How much are you investing for
retirement in other ways, including mutual funds,
stock market accounts, and IRAs?
For each expense category, figure the difference
between what you’re spending now and what you
expect to spend after retirement. Enter those amounts
onto Worksheet 3, “Estimated Changes in Spending
After Retirement” (page 9). If your retirement expense
will be lower, put the difference in the “less” column.
If the expense will be higher, put the difference in the
“more” column. Then compare the totals.
Planning for Future Inflation
On Worksheet 2, “Estimated Annual Cost of
Living,” you calculated the effects of inflation on your
living expenses until you retire. But inflation will
continue, at some rate, after you retire. A man retiring
today at age 65 can expect to live 16.8 more years; a
woman, 19.7 more years (See Table 2, “Expectations
of Life by Age and Sex” (page 10). How will your
expenses be affected by inflation then?
To see how inflation will affect your budget into the
future, turn to Worksheet 2 (page 6). Copy the totals
from the right-hand column, “Your Future Budget at
Time of Retirement in ____ Years” into Column 1
on Worksheet 4, “Estimated Annual Cost of Living
10 Years After Retirement” (page 12). Then go back
to Table 1, “The Inflation Factor” (page 7). Choose
an inflation rate and find the factor for 10 years.
Multiply that factor by the figures in column one on
Worksheet 4. Record your answers on column three
of Worksheet 4.
How much will inflation increase your living costs?
Even a moderate rate of inflation will push up those
costs over time. This shows that it will be necessary
to plan for retirement income that will keep pace with
inflation as much as possible. The example on page 11
assumes an annual average inflation rate of 5 percent.
Planning for Large Future
Irregular Expenses
Some expenses do not occur every month, or
even every year. These are the ones you are most
likely to not plan for (a new roof, an appliance that
dies, another car). These expenses are most likely to
interfere with your retirement budget.
Use Worksheet 5, “Large Future Irregular
Expenses” (page 13), to help you plan ahead for some
of these large expenses. This worksheet will help you
answer some basic questions as you plan ahead for
your large expenses. Think about when you expect
the expense to occur and the estimated cost. Do some
years have more expenses than others? Can you shift
some of those costs to other years? Or, can you set
aside savings in less expensive years to pay for them?
Can good maintenance and/or repairs lengthen the life
of some items so they won’t have to be replaced so
soon? Can you live with certain items after they are
no longer in tip-top shape? Are there some items you
won’t replace as they wear out? What can you replace
before you retire when you may have more money
to pay for them? (Note: The average life expectancy
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Expense
Now Spend
About How
Much?
Expect to
Spend After
Retirement
Less After
Retirement
More After
Retirement
Work related:
Transportation
Clothing
Dues
Meals
Other
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Social Security taxes
(taken out of check)
$
$
$
$
Income taxes $ $ $ $
Pension plan contributions
$
$
$
$
Contributions to other
retirement accounts
(IRA, etc.)
$
$
$
$
Savings, investments
for retirement
$
$
$
$
Travel $ $ $ $
Entertainment, leisure
activities
$
$
$
$
Health insurance $ $ $ $
Other health care costs $ $ $ $
TOTALS
$
Less
$
More
Adapted from Financial Planning for Retirement, NCR-265, Field and Hathaway, Michigan State University CES, 5/87.
Worksheet 3 – Estimated Changes in Spending After Retirement
Use this worksheet to calculate possible changes in your expenses. For each expense category, figure
the difference between what you are spending now and what you expect to spend after retirement. If
the retirement expense will be lower, put the difference in the “less” column; if it will be higher, put the
difference in the “more” column. Add the figures in both columns and compare the totals. Which total is
larger? What does that suggest about your future spending? Will you need to make some changes in what
you expect to spend?
10
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Table 2: Expectation of life by age and sex
All Races
Age Total Male Female
0 77.4 74.7 80.0
1 77.0 74.3 79.5
5 73.1 70.4 75.6
10 68.1 65.5 70.6
15 63.2 60.5 65.7
20 58.4 55.8 60.8
25 53.6 51.2 56.0
30 48.9 46.5 51.1
35 44.1 41.8 46.3
40 39.5 37.2 41.5
45 34.9 32.8 36.9
50 30.5 28.5 32.3
55 26.2 24.3 27.9
60 22.2 20.4 23.7
65 18.4 16.8 19.7
70 14.8 13.4 15.9
75 11.7 10.5 12.5
80 8.9 7.9 9.5
85 6.6 5.9 7.0
90 4.8 4.3 5.0
95 3.5 3.1 3.5
100 2.5 2.2 2.5
Source: National Vital Statistics Report, Vol. 54, No. 14, April 19, 2006, Report revised March
28, 2007.
Retrieved Aug. 5, 2009
www.cdc.gov/nchs/data/nvsr/nvsr54/nvsr54_14.pdf
11
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Financial Planning for Retirement Workbook • CFS-685-W
estimates listed on Worksheet 5 are just a guide. Your
items may last longer or may need to be replaced
sooner.)
How Much Are You Worth?
As you develop your financial plans for retirement,
you need to know the resources you already have.
A net worth statement gives you that information.
On Worksheet 6, “How Much Are You Worth?”
(page 14), list your current assets and liabilities. Your
assets include everything you own that is of any value
(like cash on hand, your checking and savings account
balances, the current market value of bonds, stocks,
and other investments). Your liabilities include the
outstanding balance due on the debts you owe (such
as your home mortgage or car loan, and other unpaid
bills). Subtracting your liabilities from your assets will
show your net worth.
You may be able to get a fairly accurate estimate
of your home’s value from a real estate firm, or you
can pay a professional appraiser to do this. Other
appraisers can estimate the value of antiques, jewelry,
or other unique valuables (such appraisals should also
be recorded for insurance purposes).
Every year, perhaps at the first of each year, review
your net worth statement and update your figures for
any changes in your financial situation over the year.
Estimating Retirement Income
Where will your retirement income come from?
The primary sources of income for most retirees are
Social Security, public and private pensions, personal
savings and investments, and earnings. In 2006, Social
Security provided 37 percent, earnings 28 percent,
public and private pensions 18 percent, and income
from assets, 15 percent of the income of people 65 or
older.
1
1
Source: Income of the population 55 or older in 2006,
SSA. Retrieved from www.ssa.gov/policy/docs/statcomps/
income_pop55/2006/index.html August 2009.
Sources of Retirement Income
1. Social Security
Social Security provides a base level of income for
most retired people, although it was never designed
to replace all lost earnings. Knowing the amount you
will receive from Social Security will help you plan
your total retirement package. Your eligibility for
Example: Estimated Annual Cost of Living 10 Years After Retirement
Your Budget at
Retirement
Inflation
Factor
Your Budget
10 Years After
Retirement
Housing
$17,025 1.63 $27,751
Household operation and maintenance
$3,813 1.63 $6,215
Automobile and transportation
$10,287 1.63 $16,768
Food
$7,726 1.63 $12,593
Clothing
$3,047 1.63 $4,967
Personal
$2,601 1.63 $4,240
Medical and health
$2,847 1.63 $4,641
Recreation, education
$2,837 1.63 $4,624
Contributions
$1,262 1.63 $2,057
Taxes and insurance $1,902 1.63 $3,100
Savings, investments
$1,333 1.63 $2,173
Irregular expenses
(ex. gifts, license plates, holiday
spending, etc.)
$513
1.63
$836
ANNUAL TOTAL $55,194 1.63 $89,966
From Financial Planning for Retirement, NCR-264, Field and Hathaway, Michigan State University CES 5/87.
