One of the most heavily discussed aspects of retirement is how much money you’ll need to retire comfortably. However, it’s tricky because this number will be different for everyone. Some things to consider when calculating how much money you’ll need in retirement include your health as you age, where you’ll live and your living costs.
Life expectancy is increasing, which means savings may need to last up to 30 years!
It’s generally said that individuals will need between 70 and 80 percent of their pre-retirement income after you finish working. To be safe, we recommend that you prepare to save 90 to 100 percent to account for unexpected expenses, like long-term care.
Calculating Your Living Costs
One of the more clear-cut estimations you’ll need to make is how much you can expect to spend each year in retirement. You can get a decent idea by considering how much you are spending now. But keep in mind that, the Employee Benefit Research Institute found that in the first two years of retirement, nearly half of families spend more in retirement than they did when they were working.
If you’re nearing retirement age, calculate the estimated amount you’ll spend each year in retirement on the following categories (account for an increase in shopping, travel, etc.):
- Health Care
- Monthly Housing
- Travel and Entertainment
- Contributions to Children and Grandchildren
Calculating Your Health Care Costs
A study by the Bureau of Labor Statistics showed that the mean amount that individuals age 65 and older can expect to spend on health care annually is close to $6,000.
Health costs will likely account for most of your spending in retirement. This often comes as a surprise to many of our clients, which is why we recommend setting up a one-on-one consultation with one of our local Benefit Advisors to walk through your needs and expectations for a health plan in retirement. We’ll recommend the right plan for you and even help you enroll once you select a plan. Call us at 1-866-600-5638 today!
What Can You Do if You Haven’t Saved Enough?
One option is to work part-time or use your hobbies to yield income in retirement. You can also consider moving to a home that costs less, which will make it easier to save!
More importantly, don’t give up because you feel discouraged! There is still time. Focus on saving by cutting back on travel, eating out, or shopping—wherever most of your disposable income is going—to save and earn interest on your money.