The Retirement Corporation of America

How To Put Your Plans Down On Paper

START BY ORGANIZING your goals, based on what you want, when you hope to achieve them, and the cost involved. Click here for a sample worksheet to help you.

How to Calculate the Costs of Your Financial Plan

These goals form the basis of your financial plan, broken down by:

•  What you really want (check off all that apply).

•  When you really want them (by approximate date).

•  How much you estimate they will cost.

The next step is to think about how much it will take to reach each of those goals. You don't have to be precise or down to the penny. Just be honest about what things will cost. If you have your heart set on a power boat, be realistic about what it would cost you. If your financial plan isn't realistic, then it isn't worth the paper it's written on.

You obviously can't know today precisely what college will cost for the kids in 10 years, or how much a year you'll need to live on in retirement in 20 or 30 years. All you can do is make "guesstimates"--your best guess today about what things are going to cost when you expect to reach that goal. Here's the way you would go about it:

•  How much does a home in the area you want to live cost--and what would be a reasonable down payment?

•  What would four years at the college of your choice cost now? Take that number, add 5% a year for inflation times the number of years until the youngest child graduates. That's a rough estimate of what college will cost.

•  What, roughly, does it cost for you and your spouse to live today? For a rough guide, take 75% of that as the cost of supporting you and your spouse in retirement. Multiply that by 25 years, and you have a rough estimate of how much you'll need for retirement.

So that's the first part of financial planning--goal setting. The rest of financial planning involves charting your progress toward being able to pay the cost required to achieve those goals.