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Chapter 15. Invest to Win and Avoid the ... > Financial Goals (Your Destination)

Financial Goals (Your Destination)

The reason that most people have only vague financial goals is that they do know how to formulate specific goals. A common goal is to maintain a certain standard of living in retirement. But how much money will be necessary for that? This section details the process of defining a specific investment goal. Once the goal is known, you will create your roadmap for getting there. What is important about having money for retirement? The money is to ensure that you attain your desired standard of living. Simply follow these steps to determine your own specific goal.

The first step is to decide what standard of living you want (within reason, of course!). A common answer for people in their mid-career or late career is that they want to maintain their current standard of living. People newer to the work force probably have not attained their desired standard of living yet and want a higher standard of living. You may decide that your current annual income is the income you want in retirement. That way, you will maintain your current standard of living. There are also two important points to consider when thinking about this issue. First, you may need less income in retirement because you may have fewer expenses (like job expenses), you may have paid off your mortgage, and you will no longer need to save for retirement. The second issue that I am referring to is money with today's value. Because of inflation, the actual amount of income you will need will be greater. But we will deal with this issue later.


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