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How much money do YOU need to retire? Simple steps to calculate YOUR needed income.

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Standard - by - October 14, 2014 - No Comments

Do you need 1 million dollars to comfortably retire?  Or maybe 2 million? Or perhaps 10 times your annual salary?  If you don’t already know your answer, then you may want to consult with a professional.  There are multiple ways to determine how much money you might need in retirement just as there are multiple ways to invest your money.

Most experts agree you will need somewhere between 75-80% of your pre-retirement income to live on, but you should do the math to get a more accurate picture of what to expect and plan for.  Mr. Sightings recommends starting with your current annual expenses or monthly expenses.  Annual calculations might be more accurate as it will include expenses that do not come up monthly, such as vacation and property taxes.  Take this number and subtract the amount you have been putting away every month towards retirement, deduct what you are paying in payroll taxes, and deduct your savings if you will be moving to a smaller home with less maintenance and taxes.

Figure out the changes to your lifestyle and calculate the cost or savings; will you be traveling around the world, you will no longer be commuting or purchasing clothing for work, will you be eating at home, your grocery bills will likely drop as you will have more time to watch for sales.  Factor in differences in health care costs.  For those that have been paying for their own healthcare, they should see a drop in this expense when they join Medicare, but for most people these costs will increase, especially as you age.

The last step is to add up the total of your incomes in retirement, social security, pension, rents, royalties, Reverse Mortgage Guaranteed monthly payouts for life, and any other income you may receive.  Finally subtract your expenses from your projected income.  The greater the surplus you have, the better equipped you are for the unexpected in retirement.  If you have a shortage, it is better to make sacrifices and adjustments now to prepare for the future.  Either way you should consult with a professional to ensure that you are not missing some important details/expenses (such as offsetting for inflation) that will come your way in the coming years and that your investments are full optimized.

Planning for your retirement on your own is like trying to build a home with no blueprint.    It might look good from far away, maybe really, really far away, but the closer you get, the easier it is to see the defects; you may not have a deep enough foundation, or your roof might not be property supported.  You can build the house, but you would at least need a general contractor to help you along the way.  Find a professional that you can trust to understand your needs and wants in retirement and that will take a look at your entire retirement blueprints to make sure you are foundationally and structurally prepared for many years to come.

(Structure from article written by Tom Sightings form US News & World Report 8/22/14)

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