Determining What Retirement Will Cost

The first step in creating a prudent retirement plan is to estimate your expenses. Begin by itemizing your fixed (housing, utilities, food, clothes, transportation, healthcare, taxes, and insurance) and discretionary (entertainment, gifts, etc.) expenditures. Organize your expenses with our Retirement Expense Worksheet.

Next, identify your retirement assets: 401(k)s, IRAs, stocks, bonds, mutual funds, CDs, and checking and savings information. Complete MetLife’s Retirement Assets Worksheet.

The final piece of the retirement income puzzle is determining your income sources (pension, Social Security, your or your partner's full or part-time income(s), annuities) and any other income-generating sources. Complete MetLife's Retirement Income Worksheet.

Once you've filled out the Retirement Income Expense, Retirement Assets, and Retirement Income worksheets, you can calculate your estimated overall retirement income and see where you stand. Ideally, you want to allocate the most reliable income sources for your basic expenses and more flexible sources for your discretionary expenses.

Begin calculation process.

If you are employed by a company that offers benefits, a good first step is to figure out which benefits you want to continue into retirement, what will be covered, and how much it will cost. Your company may have this information available on an internal website or you may need to contact your employee benefits administrator. Either way, having this information will make it easier to anticipate the costs of other types of coverage you may need.

In particular, consider your health benefits. Find out whether you are eligible for COBRA coverage. COBRA coverage permits you to maintain your health insurance for 18 months after you leave work. You will have to pay the full premium plus an administration charge for COBRA coverage.

It's easy to underestimate what you think your healthcare expenses may be in retirement. The reality is that unexpected healthcare and nursing home expenses can be significant—and could quickly deplete your assets.

Create a budget for healthcare costs by estimating your current out-of-pocket healthcare expenses, including:

• Co-pays
• Deductibles
• Prescription medication

Then compare the difference based on the type of coverage you will have if you plan on retiring before you're eligible for Medicare. Also, examine your family's health history as it may be an indicator of future medical needs and possible life expectancy.

MetLife can help you identify any shortfalls in coverage that can lead to potentially significant out-of-pocket expenses, so you and your loved ones will be better prepared for and protected from the unexpected.

What Is Medicare and How Does It Work? .

Your retirement plan should include financial solutions for unforeseen health-related expenses that may not be covered by your healthcare plans.

It's hard to imagine right now, but one day you may require assistance with daily personal care. The cost of long-term care is substantial, and medical insurance and Medicare are not designed to cover most on-going long-term care services.

Use our Long-Term Care Calculator to help determine potential costs.

Learn more about Long-Term Care Insurance in your state.

You should also consider disability income insurance which can replace a portion of your income if you're under the age of 65 and unable to work due to an illness or accident. It can help you to maintain your retirement plans by mitigating the impact of a major medical event.

Learn more about Disability Income Insurance

Although there is much uncertainty in the economy today, you can still create an effective retirement income plan that can help you afford the things you care about and protect your assets from major risks. MetLife can take you through the process step-by-step.

Learn more about Funding Your Retirement.