We all picture our retirement years being filled with free time for traveling and other exciting adventures now that we don’t have to work full time anymore. The true key to enjoying your retirement years, though, is proper planning. How your retirement looks really depends on some savvy preparing now so you are prepared for what the future holds.
How Much Do I Need to Retire Comfortably?
While “living comfortably” is different for each person, a good suggestion for those who want financial freedom when they retire is that you will need to replace 70 to 80 percent of the income you were making before retirement. For example, if your annual salary now is $60K, you will need around $45k to sustain you for each year of retirement. With average lifespans being around 80 years old, your planning will need to include funds for around 20 retirement years.
How to Estimate Your Personal Retirement Needs
When estimating your personal retirement fund needs, it is important to note that your monthly expenses will change during these later years. If you plan well, things like vacation expenses may go up, unfortunately, though, the cost of healthcare and medication will increase as well as you age.
You may also experience a decrease in things like car payments, work expenses, and your mortgage (hopefully it will be paid off by then!) Once you have determined your monthly expenses and how much money you will need each year to live on, you can then use the example above to figure out approximately how much you will need for retirement.
Don’t forget to include any money that you will receive from Social Security as well as any income from a part-time job that you may take on when estimating your retirement income needs.
Tips to Save for Retirement
If the amount you are seeing is very high – you most likely did the math correctly! While it may seem overwhelming, you don’t need to save all of this money at once! In fact, financial experts suggest that you break it up into achievable goals with your first benchmark being to have your yearly salary saved by the time you reach 30. Aim to then save three years’ salary by age 40 and six times your income by age 50, and so on until you either reach your goal, or retirement. Here are some money saving tips to help.
- Contribute to an employer-matched retirement account
- Have funds automatically deposited to your retirement account(s). Not only is this money tax deferred, but if you don’t see it – you can’t spend it!
- Invest aggressively and take some risks -– especially if you are over 30.
Good investments that grow over the years will help you save for retirement. Starting early is the key to many solid, financially stable retirement years, so you can live life to the fullest and enjoy your time off.