Retirement is a time many people dream about. However, figuring out how much money you’ll need to live comfortably after you stop working can feel overwhelming. A well-planned retirement should be a period where financial stress fades, leaving room for relaxation and enjoyment. However, without enough savings, financial worries can take over. Have you planned enough money to retire? Beck, Lenox & Stolzer Estate Planning and Elder Law, LLC, recommends you start planning today to ensure that you do have enough to retire.
How Much will You Need for Retirement?
When planning for retirement, one of the first questions is, how much money will I need? A common guideline suggests that you’ll need to replace about 70% to 80% of your current income in retirement.
For example, earning $100,000 per year may need between $70,000 to $80,000 each year after you retire. This estimate considers that some expenses, like commuting or child-related costs, may decrease, while others, such as healthcare, may increase.
What Type of Retirement Lifestyle do You Want?
Your retirement lifestyle plays a big role in determining how much you need to save. Will you live simply, or do you plan to travel frequently or move closer to family? Dreaming of trips to Paris or a cozy beachside home will require a bigger nest egg than staying in your current house and living modestly. How you want to spend your retirement will help you estimate your expenses.
How Much have You Saved So Far?
Another key question is: How much have I saved for retirement so far? Look closely at your current savings, including retirement accounts like a 401(k) or IRA. If you’ve been saving regularly, you might already be on track. However, if you’re behind, you still have time to adjust. Consider increasing your savings rate or exploring new investment opportunities to catch up as said by Charles Schwab.
What are Your Additional Income Sources?
Many retirees rely on more than just their savings to cover expenses. Social Security is one of the most common sources of income for retirees. However, it’s important to calculate how much you can expect to receive. Other income might come from pensions, part-time work, or rental properties. Combining these sources can reduce the pressure on your retirement savings.
How do You Calculate Retirement Needs?
According to Smart Asset, the best way to determine if you’re on track for retirement is by calculating how much you’ll need. Start by determining how much you want to spend annually and subtracting your expected income from Social Security or other sources. The remaining amount is what you’ll need from your retirement savings.
Experts often recommend having a portfolio 25 times the amount you need to withdraw in your first year of retirement. For instance, if you need to withdraw $60,000 annually, you should aim to save at least $1.5 million by retirement.
What If Your Savings Fall Short?
Don’t think you have planned enough money to retire? If you find that you haven’t saved enough, don’t panic. There are several steps you can take to adjust your plan. Consider working a few extra years or delaying Social Security benefits, which increase the longer you wait. You can also reduce discretionary spending, like travel and entertainment, to stretch your savings further.
What Should You Do Next?
Planning for retirement doesn’t need to be overwhelming. However, it does require attention and effort. Calculating how much money you need, taking stock of your savings and adjusting your strategy as needed can help ensure a comfortable retirement. While some people might get lucky and have everything fall into place, most must make careful financial plans to avoid running out of money.
Start Building Your Personalized Retirement Plan Today
Preparing for retirement can feel complicated. However, you don’t have to do it alone. If you’re unsure whether your savings will last or need help creating a comprehensive retirement plan, now is the time to act. Contact our Beck, Lenox & Stolzer office today to schedule a free phone consultation and start building a retirement strategy that fits your goals. Your future self will thank you!
Key Takeaways:
- Estimate Your Needs: Knowing how much money you’ll need in retirement is essential to building a sound financial plan.
- Consider Your Lifestyle: Whether you plan to live modestly or travel the world, your retirement lifestyle will impact how much you need to save.
- Utilize Multiple Income Sources: Social Security, pensions and other income sources can supplement your savings and help ensure financial stability.
- Adjust if Necessary: If your savings are behind, there are steps you can take, like working longer or cutting back on discretionary spending.
- Create a Plan: A calculated retirement plan can reduce anxiety and ensure a more comfortable, secure future.
Have you planned enough money to retire? We are happy to work with you and your financial advisor to make sure you are in the right position to enjoy your retirement.
References: SmartAsset “Retirement Calculator – See How Much You’ll Need to Retire” and Charles Schwab (May 8, 2023) “Do You Have Enough for Retirement?”
