Retirement can be one of the saddest or happiest days of your life. Deciding how much retirement income is enough will be determined by several factors. Changes in inflation will impact your plan, as well as achievable returns and your personal situation. Our retirement planning calculator will help you determine how well you have prepared and what you can do to improve your retirement outlook.
Remember that individual circumstances largely determine how long retirement savings last. Be sure to consider how a change of living expenses in retirement can help determine what you need.
How Much Should I Be Putting Into Retirement?
If you’re wondering “how much do I need to save for retirement?” there are several ways to determine how much you need. Keep in mind that savings for retirement now will cut into your discretionary spending today, but it will help you enjoy more income later on. You want to ensure you do not save too little. You do not want to run out of money when you are out of the workforce and earning more would be difficult.
In general, there are a few questions you will want to ask:
- What can I rely on in retirement? Consider how much you may get for Social Security and also calculate how much you already have in retirement savings. Consider any employer pension you may have. Also consider whether your employer matches retirement contribution, since this can help you save faster. When calculating what you may be able to turn to in retirement, keep in mind that Social Security may change by the time you retire.
- How old am I, and when do I expect to retire? The younger you are when you start to save for retirement, the less you may need to put aside each month, since you can rely on interest. If you expect to retire earlier, you may need to increase savings to account for the fewer years you will be saving. Consider whether you can expect to retire early. In some industries, retirement occurs earlier due to the hazards or the challenges of the job.
- What is my health like? If you have chronic health conditions, consider how health care spending may impact your savings now and your costs after retirement. Also, consider how your health may impact your life expectancy. If you are healthy and expect to live a long time, you will need to save more because your retirement money will need to last longer.
- What is your financial life like now, and how do you expect this to change after retirement? Consider your current lifestyle and how you spend money. Create a list to calculate your spending habits to see where your money goes. Then, consider how this may change in retirement. Will you continue to live in your current home, with your current expenses? Will you have paid off your mortgage by retirement? Will you be living somewhere else? If so, consider the expenses there. Try to estimate your retirement expenses based on current living costs, future goals and inflation. Use this to determine how much you might spend per year to see how much you will need annually to retire.
Remember that your retirement plans will change over time. Be sure to update your plan regularly so you can adjust your savings as needed.