Retirement isn’t what it used to be. With longer life expectancies, energy-filled senior citizens along with important medical advances, people today must take different approaches to retirement planning. And, of course, they will need enough money to last until they die.
In retirement, you know that your everyday living expenses may be covered, and, perhaps, the chance for some domestic and foreign travel. But living longer brings new costs and concerns.
Saving and investing
There will be additional health and medical expenses. And what about living arrangements once you no longer can safely stay in your home?
That’s why it is so important to have a strong foundation of saving money, knowledge of investment options, and understanding personal finance matters. How much money will you need in retirement? A true retirement number, though, is different for everyone.
The general rule of thumb, according to some financial advisers, is that you will need 70 to 80 percent of their pre-retirement income once you are no longer working. In using this formula, someone who earned $50,000 per year, would need to generate $37,500 to get through one year of retirement.
However, some people may need 100 percent of their pre-retirement income for several years after they’ve stopped working. This is because many new retirees choose to travel for a bit, going on domestic trips or venturing to exotic, which are not inexpensive.
According to Chicago-based investment research firm Morningstar, a retiree who hopes to generate $40,000 per year will need savings of $1.18 million to support a 30-year retirement. If you’ve maintained a routine of saving as much as 15 percent of your earnings each year, good for you.
Questions to ask yourself
If you want to know whether you’ve saved enough money for retirement, here are some questions you need to ask yourself:
- What do you plan to do? Some retirees travel, stay at home and volunteer. Others continue to work in part-time roles or start their own business.
- How much will my living costs be? By tracking your monthly and annual expenses, you can determine this and create a budget.
- How healthy am I? If you have an active lifestyle, you may expect to live longer than most. So you will need some more money in retirement.
- Where will I live? You may have to move out of your home into an assisted living center or nursing home, which can be costly.
- How long do I expect to live? If you’ve got good genes and a healthy lifestyle, you might live a bit longer than others. That’s why you need to sock away more money into savings.
These factors show why it’s so essential to have a solid nest egg of retirement funds ready for you and your family to rely on during your golden years.