Calculating the money you’ll need in retirement is only one piece of the puzzle. The connecting piece is your desired lifestyle, which may include whether you plan to work part-time, travel, and any other way to spend your days.
What is My Desired Retirement Lifestyle?
When you picture yourself in retirement, do you envision living in your current home, driving your current car? Are you debt-free? Are you content with inexpensive activities, or is retirement your time to travel the world, dine out, or maybe buy a vacation home?
Your retirement lifestyle is the biggest factor when it comes to money to be saving now. Many experts recommend you set aside 10% to 15% of your income starting in your 20s, but that isn’t realistic for everyone.
How Can I Save and Grow My Money Now?
The good news is that with your CalPERS pension as one retirement income stream, and Social Security (if applicable) as another, you can develop an additional retirement income source with a deferred compensation plan.
These voluntary deferred retirement savings plans allow you to defer any amount, subject to annual limits, from your paycheck on a pre-tax and/or Roth after-tax basis. This is considered the third retirement income stream, or the third leg of a three-legged stool, for a solid financial foundation in retirement.
Do I Plan to Work in Retirement?
Another factor to consider is whether you want to work in retirement. Keep in mind if you are planning to supplement your CalPERS pension by working after retirement, there are specific laws governing the type, timing, and amount of work you can accept without affecting your pension. Check out A Guide to CalPERS Employment After Retirement (PUB 33) to learn more.
Will I Have Passive Income?
Streams of income to bolster your retirement cash flow can close the gap to affording the lifestyle you want in retirement. However, having these extra income sources doesn’t guarantee you can step away from it all. You’ll need to make sure you either have time to manage your investments or hire an investment manager to do the work for you.
How Can I Learn More?
If you’re interested in learning more about how to plan for your future, set some time aside to watch our Planning Your Financial Future video series. From there, our Planning Your Financial Future Checklist is a great resource to review.