Plan Ahead, Don’t Leave It Up to Chance
How much is enough to live on comfortably in retirement? No matter their age, this is an important question for working adults to consider. With a concrete number in mind, it’s possible to reverse calculate what yearly contribution it’ll take to reach that number before retirement age. There are a few different approaches to planning to save the right amount for this season of life.
It’s All About Expenses
To accurately plan for retirement, working adults need to know that maintaining their current lifestyle, not their income, should drive their savings goal. It’s easy to determine how much yearly income is necessary with a budget in place.
Let’s take a look at this example: if $65,000 a year can cover housing, food, clothing and medical expenses, this number is a good starting point. From there, it’s possible to calculate a retirement figure by multiplying that salary by 25 years. In this example, retirees need to save a minimum of $1,625,000.
Plan for Changes
Although current expenses are a pretty good indication of how much is needed to live well after retirement, they don’t provide the whole picture. Many adults will experience life changes that’ll increase or decrease their monthly expenses.
Paying off a mortgage and having children leave home frees up room in the budget. However, if medical needs arise or adult children need financial support, it increases monthly expenses. When in doubt, it’s best to plan for unexpected medical expenses to increase with age.
Consider Social Security
Most working Americans can anticipate receiving Social Security income when they retire. While the amount varies from person to person based on their individual work record, around 40% of their pre-retirement income is typically paid out to retirees.
The Retirement Estimator provided by the Social Security Administration paints a more accurate picture of how much will be paid out monthly based on current laws and previous work history. Individuals who expect $20,000 a year in Social Security benefits can use that number to adjust their overall savings goal.
Saving up for retirement is an important consideration. Plan ahead and you’ll be able to reap the rewards of working hard.
~Here’s to Your Financial Health!
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