How Much Money Do You Need to Retire?

How Much Money Do You Need to Retire?

If you’re wondering how much money you need to retire, the quick answer that most financial advisors would tell you is 60 to 80 percent of your final working years’ income to maintain your standard of living after retirement. That may or may not be representative of how you’d like to enjoy your retirement, but it’s a starting place.

Take a closer look at how your monthly budget will change in retirement. You need to determine for yourself, based on what matters most to you, just how much money you’ll need each month to have the retirement that you’ve dreamed of.

Take a look at an example monthly retirement budget. This example illustrates a monthly cash flow need in retirement of about 74% of this person’s current budget.

What does this budget tell you about this person’s lifestyle in retirement?

Consider the following observations:

• This person’s home is paid for at retirement, but the insurance and taxes don’t go away.
• Health insurance that was once provided by the employer is now the retiree’s responsibility. Ouch!
• The retiree has no need to pay for disability insurance after retiring because the income she was insuring is gone.
• Cable and phone bills paid by the employer transfer to the retiree.
• Healthcare and prescription drug costs go up substantially; however, gasoline, commuting expenses, clothing, and dry cleaning costs drop significantly after retirement.
• Dining out and school lunches go down, but vacations, traveling, entertainment, and charitable contributions are up drastically.
• The retiree in this example does his own lawn and home care.
• By the time of retirement, no additional retirement savings are necessary, and college savings are also funded.

Not only will this retiree be able to sustain his standard of living in retirement, but he will also have money to do the things that matter most to him. However, be sure to note that this person currently has a mortgage payment and a home equity line of credit and is saving $2,000 per month for retirement, which is the primary reason for the reduced need in retirement.

Check out your retirement income needs as a percentage of your current cost of living by using Your Monthly Retirement Budget worksheet.

Click here to download and print Your Monthly Retirement Budget worksheet.

What does this budget tell you about your lifestyle in retirement? Does it jive with what matters most to you? If you don’t feel that what matters most for your retirement is reflected in your monthly retirement budget form, can you adjust or rearrange any of the expenses to better reflect your priorities and values?

Happy Investing

Source:Scripbox