“Can I retire?”
That’s a question everyone asks themselves at some point, followed by, “How much do you need to retire?”
It turns out those questions don’t have easy answers. Figuring out how to plan for retirement can be confusing and messy.
Truthfully, there’s no one size fits all answer. That’s why it can be so difficult to plan for retirement.
But don’t worry, we have some retirement tips to help you figure it out. Keep reading to learn how much you need to retire.
Determine Your Income Sources
First, look at what your income will be. Most people will qualify for social security, which will replace a good chunk of their pre-retirement income.
If your current or any previous jobs had pensions be sure to include them as well. Also, additional sources of income such as rental property income should also be included. If you have an annuity, be sure to include that too.
If you’re not sure what your Social Security income will be, you can get a good estimate from the Social Security site. You can visit the website and create a login to get an estimate of your anticipated social security income. The site will give you an estimate based on your work history and your expected retirement age.
Anticipate Your Expenses
By anticipating your expenses, you can determine how much you need to save.
Do you plan on living in the same area that you currently live in, or do you plan on retiring to a lower cost of living area? Is your home already paid off, or do you have a mortgage? Do you plan on traveling – and if so, where and how often?
You need to consider the costs of food, clothing, transportation, insurance, and utilities too. You can take a look at your current monthly expenses and get a rough idea of how much you will need.
Don’t forget to also factor in unexpected expenses, such as emergency medical care or gifts for children or grandchildren.
Finally, adjust your expenses for inflation.
Many recommend setting a goal of having 70-80% of your pre-retirement income available for retirement. That’s because once you retire, some of your current expenses will be eliminated.
Many retirees are concerned with running out of money during retirement. That’s where the 4% rule comes in. The 4% rule states that retirees can safely draw 4% of their retirement savings each year (adjusted for inflation).
If you’re taking care of elderly parents, you can help them eliminate expenses by talking to them about senior living. While it may be a difficult conversation to have, senior living can help elderly parents with their healthcare and social needs. Many senior living spaces charge a monthly fee that covers housing costs, weekly housekeeping, dining, and other activities.
How Much Do You Need to Retire?
So how much do you need to retire? There’s no hard rule. You need to calculate your retirement income, estimate your expenses, and decide the lifestyle you want to lead.
Once you have a savings goal calculated, you can work towards it and your life of retirement.
Check out other articles on our site for more Lifestyle articles.