Personal Information

1)    Your birth dates

2)    Desired retirement ages

3)    Your estimated life spans

On average, statistics show that as of 1998, men and women can expect to live well into their 80s and 90s. With advances in medicine occurring at a rapid pace, the younger you are, the farther out you want to project your life span. An estimated worst case life span could be 93 for men and 99 for women. If you are currently older, try using about 90.

Incomes

4)    Salaries of your current job(s) as well as projected salaries for future jobs. Also any special income to include rents or royalties.

Taxes and Inflation

5)    Specify the state you will live in for state tax purposes.

Notice how state taxes vary from state to state based on income levels.

6)    Select a number to be used as an average inflation rate over life span.

As of 1998, inflation is very low (1-3% depending on who you ask). An average estimated lifetime inflation rate of 3.5% is a good starting point.

Savings

7)    Itemize your taxable and non-taxable savings and investments

Assets

8)    Specify the purchase date and price of your house(s), life insurance, and any other assets that could be sold to fund your retirement.

Homes (and most real estate) in general appreciates at the inflation rate.

Loans and Other Debt

9)    Itemize all loans, their start dates, duration's, interest rates and current balances. In addition, itemize all current debt.

Your financial plan will help to determine the optimum way to eliminate or manage your loans and debt. Sometimes it is best to focus on rapid debt elimination, sometimes it is best to eliminate debt more slowly.

Expenses

10)    Itemize ALL annual living expenses (excluding taxes and mortgages). Include future projected college expenses as well as any other foreseeable future expenses.

Current and projected living expenses require the most work to determine. I recommend they be itemized in GREAT detail, and estimated over your entire life span. Don't forget to include special expenses that will be incurred like those new cars, extra insurance, insurance premium increases, etc. Verify that your annual expenses will increase by the specified inflation rate above and beyond your special expenses by your planning software.

Retirement Benefits

11)    Itemize  your future projected annual pension and social security benefits.

If it makes you feel better, assume you will receive social security if you will be eligible. I assume there will be NONE for me.

In a word, PENSIONS. If you are 20 years old, you may not want to assume beyond a shadow of a doubt that you will ever see one. If you are 65, and will retire next year, and everybody in your company loves you, then by all means include it as part of your plan. A current trend I am seeing in Corporate America is that stock options may be starting to replace pensions (e.g. study the new proposed pension plans at AT&T and Lucent Technologies).
 

Estimated Rate of Return

12)    Determine your estimated risk and rate of return over your lifespan(s).

Risk and Return is a tricky one. This will have a VERY big impact on your plan. This is where you project what your rate of return will be on your savings and investments before and after retirement.

If you don't have a good feel for this, try using the following information as a guide:

High Risk:              11% before retirement; 10% after retirement
Moderate Risk:       9% before retirement; 8-9% after retirement
Low Risk:               8% before retirement; 6% after retirement

 If you are lost, use 9% before and after retirement if you invest in mostly stocks, or use 6% across the board if you do mostly bonds and money markets. Try both of these cases to evaluate the impact it has on your retirement plan.