Is there some magic number for how you need to retire comfortably? You’ve likely heard numbers ranging from $1 million to $1.5 million regarding convention retirement wisdom. Some experts recommend saving 10-12x your current income. These amounts can sound scary, especially if you’re getting close to retirement age.
Instead of panicking about how much income you’ll have in retirement, determine what your true retirement number is. Americans for Life advisors will help you calculate factors including where you live, your health, and potential age to strive toward an optimal retirement income. Here are the first few steps you’ll need to discuss with a financial advisor:
What are your current living costs? Your Americans for Life financial advisor will walk you through creating a budget and tracking your expenses. There’s a well-established rule that you need 70-80% of your pre-retirement income once you stop working. If you still owe money on your mortgage or pay rent, figure those costs into your living expenses. Some financial planners today suggest you need 100% of your pre-retirement income each year for the first ten years.
Your spending won’t likely slow down in retirement, as with inflation and increased travel, costs only go up.
Will Your Savings Generate Enough Revenue?
Interest rates are constantly fluctuating—and there’s no way to predict what will happen to them (or inflation) in the future. With average age only increasing, you need more income than ever to support a 30-year retirement. To generate $40,000 annually after working, you need over $1.1 million at a rate of 6% return and 2.5% inflation.
What About Social Security?
Depending on your age, Social Security can help replace a good portion of your income. If you put enough into the system, it can be a significant part of your retirement income. An Americans for Life Advisor can walk you through how much Social Security income you’ll receive based on when you retire and how long you defer receiving it.
What if I’m Behind?
Don’t give up if your retirement number feels out of reach. Keep saving, catch up on your goals, and try to make up as much as possible in the time you have left. The power of compound interest means that even in one decade of your working lives, it’s possible to double your nest egg with a typical 7% return in an index fund. If you’re spending money on travel or living beyond your means with cars or other luxuries, cut back and save that money for your retirement while you’re still working.
Determine a Goal Retirement with Americans for Life
Planning for your retirement can be stressful, so get help with the expert advisors from Americans for Life. They’ll help you get your portfolio in order, from IRAs, 401ks, Social Security, savings account, pensions, and other forms of income you’ll use in retirement. Get in touch with Americans for Life today to get your retirement income on track and start saving the right way to ensure you’ll be comfortable when you retire.