Thursday, February 7, 2013

Benefits of Retirement Tracking

Still in my 30s, retirement can seem like such a long way off. And in our current economy and with the way things are headed with Social Security, Medicare, and the apparent general lack of government willingness to take steps to fix these issues, finding a way to look at retirement planning positively is becoming increasingly difficult for me to do. This however, doesn’t mean that I’m not taking steps to learn more about my retirement and look for ways to plan for and fix my own retirement situation, even if my federal government isn’t willing to help out.

The following are some of the things I’ve done -- and in turn, learned -- about my retirement and retirement tracking.

What I’ve Tracked
I’m a highly analytical person, so I love to track various components of our financial lives. From utility and home costs, to baby expenses and income, there is just about no aspect of our finances that I don’t track, gauge or watch to some extent.

When it comes to retirement progress, I tend to take several major areas into consideration. First off, I gauge overall expenses on a monthly and annual basis so that I can gauge costs, cost changes, and personal inflation rates. This can be a good indication of the direction our costs are heading over time, and by watching our personal inflation rate, I can get a better feel for where our expenses will be as we age.

Second, I gauge our overall asset totals. By watching things like savings, retirement accounts, savings bonds, our home value, and other assets, I can see overall changes in these various assets and determine the progress we’re making over time and at what rate. This provides me with an overall investment return that I can use to gauge future investment growth until retirement.

And third, I gauge our income totals so that I can get a better feel not only for how much money we make, but for how much is going to Social Security and what our (estimated) Social Security benefits will (hopefully) one day be.

How I Tracked it
So how do I track all this stuff? Well, it’s really not that difficult and I don’t try to make it harder than it needs to be. Relatively simple spreadsheets that I update regularly work just fine. For spreadsheets like income, I just use one page that I fill in month by month throughout the year, creating a new page for the following year so that I can go back and review my annual progress over time. For my asset tracking, I tend to create a new copy for each month so that I can break down progress both month-over-month and year-over-year.

Takeaways
So after four years, what exactly have I learned from my tracking?

Well, for one thing, as I already mentioned, I can get a feel for how various investments are progressing over time. Beyond this though, I can gauge overall progress in asset totals, determine seasonal adjustments (like summer when my wife isn’t working), and keep all our retirement-related information in one simple to view and utilize location. This way I can compile all our totals (Social Security benefits, retirement accounts, savings, home value, etc.) in one place.

Over the four-year tracking timeframe, not only have I been able to determine investment return values, but overall growth as well. With such numbers to aid my planning, I can get a better feel for where we’ll be in 10, 20 or 30 year’s time, see where we need to make adjustments, and look for ways in which we need to or could diversify into riskier or safer investments based upon our returns and asset allocations.

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