HOW MUCH MONEY WILL I NEED TO RETIRE?
Many financial experts estimate that it will take between 70% and 80% of your final
employment earnings to support a comparable lifestyle after your retirement. However,
depending upon the lifestyle that you choose, you may need a larger or smaller
percentage of your final earnings to support yourself in your retirement years.
For most people, certain expenses will decline after retirement. Mortgages may be paid.
The cost of commuting to work and the cost of business clothes will disappear. Children
will be grown and out of the household. Taxes are usually less, and there is no longer the
need to put a portion of your earnings into a retirement plan. In addition, senior citizen
discounts can reduce the cost of travel, entertainment and even banking fees.
However, health care expenses tend to rise with age. If you retire before age 65 you’ll
need to purchase medical insurance until Medicare begins. Even after that, co-payments
can become a burden if you are on a limited income. If you have an aged parent or an
adult child in financial need, that can also add to your expenses.
In truth, there is no easy formula to determine the income that you will need in your
retirement years or the nest egg that it will take to provide it. Therefore, it is important
for you to cost out your retirement plans. Take a long hard look at your current expenses
and project how they will change during your retirement. Think about the lifestyle that
you hope to maintain in your retirement years.
You should also keep in mind that inflation will erode the purchasing power of your
savings. While no one can predict your future expenses, it is worth your time to make
your best estimate. That way you will know whether you are on track to the kind of
retirement that you are looking forward to. An idea of the income that you will need is
the necessary starting point in the calculation of how much you need to save now. There
are several resources to help