We’re willing to bet that you would like to retire someday. After all, who wants to spend their entire life working? However, if you want to be able to retire in any comfort, you should start thinking (sooner than later) about how much do you need to retire, and how you’ll accomplish that goal.
Estimating What You’ll Spend in Retirement
The most important factor in how much do you need to retire is how much you’ll spend each month in retirement.
To gain a realistic picture of this figure, you’ll need to look at your current spending habits and think about how those might change. For example, if you’re currently paying a mortgage, you might have it paid off. There’s also less you’ll be saving from your income in retirement–if you save 10% of your income each month, you can take that out of your account.
Then again, this figure could be increased by medical issues, nursing home costs, or other unforeseen costs. The best thing to do is to plan ahead for any contingencies. Most people find that 80% of their current budget is an optimal level to spend in retirement years. Those who are expecting significant Social Security benefits each month might set a budget as low as 70% of their income.
Take your yearly income and multiply it by the percentage of your income you plan to spend in retirement. This will give you a yearly figure of what you’ll need to live comfortably in retirement.
You’ll also need to think about your life expectancy (never the most pleasant topic, we understand) and think about how long you’ll be a retired person. When you’re able to understand this figure, you’ll multiply it by your yearly estimated income needs to see what you’ll need throughout your retirement.
Using a Retirement Calculator
There are many online retirement tools and calculators to help you determine how much you’ll need to save by your target retirement age. Recent statistics show that the average American plans to retire around age 66.
However, the average American isn’t setting aside nearly enough to accommodate this retirement age. What’s more, Social Security benefits increase every year you’re able to defer payment (and decrease every year you’re forced to withdraw early).
Best Methods to Save for Retirement
Here are just a few of the ways you might choose to save for retirement:
Individual retirement accounts (IRAs) are the most popular way to gather retirement funds, because it offers many tax advantages that other retirement-savings methods do not. These accounts allow you to put $5,500 into them each year until you retire.
If you’re having trouble earning and saving money for retirement, loans might be a good way to jumpstart your savings. If your credit isn’t optimal, but you still own several assets, title loans can be a good option.
If your employer matches your 401(k) contributions, there are few better methods to save for retirement. These contributions top out at a figure closer to $20,000, making them a better option for those who have waited a little too long to start saving for retirement.
Best of luck saving how much do you need to retire!