If you want to have a comfortable and relaxed post retirement life, you must start working for it today and a Retirement Cost Analysis is a great place to start. What you plan and save in your pre-retirement days will determine how you will live after retirement. An in depth analysis of your current expenses is required to assess how much you will need to save to maintain the same lifestyle in future and to appropriate perform a Retirement Cost Analysis.
If you do not want your life to change drastically after retirement, it’s time that you pull together your credit card receipts, pay statements, bank statements, loans and other receipts to get an idea of your current yearly spending against what you think those costs will be after retirement. The Retirement Cost Analysis will help you paint a realistic picture of your post retirement days.
Housing is a budget buster – it accounts for the largest portion of an average retiree’s household expenditure. Here is an estimated breakdown of how much each expense will account for in your post retirement budget:
–  Housing – 35%
–  Transportation – 16%
–  Out-of-pocket health care – 8.2%
–  Food – 15.3 %
–  Entertainment – 5.1%
–  Apparel – 2.6%
 How to Perform a Retirement Cost Analysis
A retirement cost analysis usually begins with preparing a cash flow statement. This statement will list the cash inflows (employment and investments) and the cash outflows (expenses)
Cash outflows are divided in three categories:
–  Fixed outflows – there include taxes, loan payments, insurance premiums, and housing costs like rent or mortgage payments.
–  Savings and investments – these are deposits made to investment and savings accounts, like elective contributions to your Thrift Savings Plan (TSP) and one-time or periodic deposits into investments vehicles like mutual funds, bank account, and others.
–  Variable expenses – those that an individual may be able to change, like food, apparel, entertainment, and travel.
Use Conservative Assumptions in Retirement Cost Analysis
Financial planners with expertise in federal retirement advise to use conservative assumptions when analyzing retirement costs. You may want to consider the following guidelines:
 Overestimate Life Expectancy
It cannot be presumed that retirees will not live beyond their statistical average life expectancy. The safe assumption to be made here is that seniors will live for 10 years or longer beyond their statistical average life expectancy.
 Overestimate the Rate of Inflation
The inflation rate can vary depending on economic trends and, often, unexpected changes can disrupt post retirement budget.  Generally, it is safe to assume an inflation rate between 3-5%.
 Underestimate the Rate of Investment Returns
The conservative approach to retirement cost analysis about investments presumes an 5-7% of ROI.
If you are facing difficulty estimating your retirement cost, let PSRetirement.com help you with a free Federal Retirement Benefit Analysis to help you ensure that your post retirement life that is as good as it can be.
