Although it is nearly impossible to predict how your pension will develop over time and how much pension schemes will change, especially if you are still many years, if not decades, away from your retirement, calculating your pension regularly and setting pension goals is a key habit to develop and establish if you do not want to be taken by surprise when you finally get to retirement age and start needing to rely on these payments to replace your regular income.
For today you are going to take control over your pension and start putting in a plan to make sure that by the time you retire you have enough money coming in.
Start by predicting how much you need per month by the time you retire. You can play it safe and take your currently yearly expenditure to work off, although your expenses might change with a mortgage being paid off, more holidays and time for hobbies, longer trips to visit family etc. Times your expected yearly amount by 1.03% for each year you are away from retirement to correct for inflation. For example if you expect to need $30,000 per year and you are 30 years from retirement, then $30,000 x 1.0330 means you need close to $90.000 a year if you don’t want to lose buying power.
Compare this amount to the current projected pay out you might get from each pension you are participating in and check how far away you are from your projected need. Take action to start closing the gap between your expected and projected pension. Especially if you have the opportunity to participate in a workplace pension scheme in which your employer matches your contribution, consider maxing out this option as it essentially means free money. Start keeping track of your pension developments on a regular basis and whenever possible increase your contributions to stay on track.
Once you have completed this challenge or if you need more help let us know in the Facebook group or via your preferred social media using #31DayChallengeToFE. More information on this challenge can be found in Step 45: Calculate your Desired Pension of the 100 Step Mission to Financial Independence.