Plan for Retirement Income

• 1). Develop a financial plan to project the income you will need for your desired lifestyle. According to the U.S. Department of Labor, or DOL, only 43 percent of Americans have taken the time to discover their retirement income needs. A retirement income calculation considers your current budget, the value of current assets and their growth rates, your life expectancy and the effect of inflation on your future purchasing power.
  
  
• 2). Determine how much income you can expect from known sources, such as pension and Social Security. Subtract the value of your known retirement income from your total income requirement as determined by your retirement income calculation. The remainder represents the value you will need to fund with alternative income sources.
  
  
• 3). Save money in IRAs, 401(k)s and other accounts targeted specifically for your retirement. Take advantage of IRA catch-up provisions if you are age 50 or older. Shave savings dollars from your current budget. According to the DOL, if you eliminate a $50 dinner for two each week and invest it at 5 percent for 10 years, you can add $31,000 to your retirement resources.
  
  
• 4). Earn more on your retirement savings. If you estimate inflation will increase annually by 4 percent, your real rate of return on your retirement nest egg must exceed that to generate growth for your future needs. Look for suitable investment options that yield 2 percent to 4 percent more than your inflation estimate.
  
  
• 5). Work longer before you retire so you can save more of your salary for future use. Delaying your retirement by a few years can decrease the income you will need to generate from savings assets or part-time work. It also gives you more time to add to your nest egg and get greater growth on your accounts.
  
  
• 6). Look for ways you can create passive income for your retirement years. Unlike your salary or pension, passive income comes from a source such as rent on an apartment. Stocks and mutual fund investments can pay you regular dividends. Some people write e-books and sell them on the Internet, generating income while they sleep. Consider creative ways you can convert your knowledge and expertise into a source of retirement income.