We’ve all heard it. “You need to save this much of your salary, you need to have a million dollars saved before you can retire”, so on and so on. I’m here to tell you there is NO exact science to financial planning because most of our financial plans depend on how long we are going to live. Unless someone has invented a time machine and I am unaware of it, no one can accurately predict how long we are going to live.
As a LAGERS members, there are some principles we can use to help us better plan for the future. One I have written about before is replacement ratios. This is illustrating how much of your pre-retirement income your LAGERS benefit will replace. By knowing how much your LAGERS benefit will replace, this helps you better understand what gaps you need to fill with other sources of income.
Some of the sources you may have as a LAGERS members are social security, part-time employment, self-employment income, personal savings and, of course, your secure LAGERS income. However, if your goal is to quit working entirely and sustain your current lifestyle sometime in the future, having some personal savings will have an impact on ability to achieve financial independence.
So, I can’t tell you how much you need to have saved, but I can give you some tips on how to achieve financial independence.
- Continue working in LAGERS covered employment. By working for a LAGERS employer, you have the opportunity to have income replaced just by serving your community. The longer you work in LAGERS covered employment, the larger your benefit will be.
- Spend money on your future self. Spending a little bit of money each month for your future self can have a huge impact on your ability to achieve financial security. By spending, of course, I mean saving.
- Spend a little more on your future self each year. While it is important to start setting aside a little money, it is equally as important to set aside more next year. The more you set aside gradually, the larger amount of assets you will have in the future.
These tips are not fail proof, but they are a good foundation from which to start.