Many people who are saving for retirement haven’t taken the time to figure out how much they may need when they retire. Financial planners who do pension consulting point out that saving without a goal could leave you in trouble when you reach retirement. After all, how do you know if you’re saving enough if you don’t know how much you may need?
Factors to consider - One way to start figuring out how much you’ll need in retirement is to look at how much you’re spending now. That will at least provide you with a starting point. Remember, though, your expenses will change after you retire:
- Expenses that may go down include income taxes, mortgage payments (particularly if you downsize), utilities, and expenses for children. Also, you may save money on commuting expenses (including gas, tolls, car payments, and insurance) and other work-related costs like clothing.
- Expenses that could go up include travel and entertainment costs and health care. While joining Medicare can reduce your expenses, you may need additional insurance and your costs may go up if your health declines.
Most financial advisors believe you’ll need about 80 percent of your current income in retirement to maintain your current standard of living1.
Review Your Income - You’ll need to assess any income you’re going to receive in retirement, such as Social Security, a pension, rent from property you may own, or other recurring income you receive.
Once you add up your income and subtract your expenses, you’ll know how much you need have saved by the time you reach retirement.
Tags: retirement planning, retirement, evaluate