How Much Money Do You Need to Retire
Posted in Retirement
Just because you're retiring doesn't mean you have to stop making plans and having goals. Retirement is more than making wise investments and saving enough money to last for the rest of your life.
This is a common question, especially among older employees. It's an often-asked question but one of the most difficult to answer. There is no single way to answer this question because of a number of reasons. One, there are several different jobs.
Two, there are thousands of companies, each with different policies with regards to compensation. Fourth, employees have varying backgrounds, lifestyles and retirement goals. However, experts suggest that a conservative rule of thumb is to plan on needing at least 80 percent of your current income when you retire.
How many years will you live after you retire?
This is an even more difficult question to answer, because frankly no one knows how long they are going to live. However, it is good to put it at 100 when planning on how much money you will need. Don't worry, if you do not live up to 100, you can leave what's left of your savings to your heirs.
What will be my expenses?
To know what your expenses will be when you retire, project what kind of lifestyle you want to have. What will be your wants and needs? Read up on retirement budgeting to help you make an estimate of what your expenses might be. Retirement budgeting helps you figure out your net worth so you can make projections on what your income and expenses might be. When you already have this kind of information you can decide how much you will need to cover your retirement expenses.
Important tips when projecting your retirement expenses: allow for inflation. About three percent higher than your projection should do it. Update your projections every two years to stay on track.
Social security
Annually, you should receive a copy of your projected social security benefits from the Social Security Administration. Read thoroughly and carefully to make sure there are no errors. Use the projected benefit amount to supplement your other projected retirement income which includes your savings, pension and retirement plan income.
Your company retirement account
Depending on your company, find out if they have a defined benefit pension plan or a defined contributions plan. If you have a defined benefit pension plan, your benefits administrator can give you an idea of your monthly payout. With other companies who offer defined contribution plans, you will need to compute what your plan might be worth.
If you have a 401k or other defined contribution plan, it is not sure whether you will have an income when you retire because your plan balance depends on your investments and how well they performed.
It is best to have all the necessary information at hand so you can check you Budget Kit to create an after retirement budget. Enter your projected income and expenses to get some idea of your future financial condition.
