Final answer:
Retirement planning requires assessing post-retirement income and addressing any shortfalls. This involves considering the impact of inflation on savings and investments and the responsibility of individuals to plan after Social Security. Tools like retirement calculators aid in determining necessary savings.
Step-by-step explanation:
Financial planning for retirement involves assessing your post-retirement income and plugging any shortfalls you find. This is important to ensure that you have sufficient funds to meet your needs when you're no longer earning a regular salary or wages. Factors such as inflation can drastically affect the purchasing power of your savings over time, making it challenging to predict exactly how much you'll need. Inflation can lead to a situation where your pension or savings do not hold the same value in the future as they did when you initially set them aside.
Saving for retirement often includes investing in stocks, bonds, or savings accounts, each carrying different levels of risk and potential returns. The disappearance of many private industry pensions means that, after Social Security, the responsibility for retirement income largely falls on individuals. Using tools like retirement calculators can help estimate the amount you’ll need to save to secure your financial future. Preparing a financial plan involves understanding all these factors and making informed decisions that balance potential risks with the expected rate of return.