Tag Archive | "Retire"

How Much Money Do You Need To Retire

How Much Money Do You Need To Retire | A Question That Must Be Answered

Retirement Savings

How much money do you need to retire? That is a question that crosses many people’s minds, but few have a good grasp about how much money they actually need to retire.   There are some pretty basic formulas and assumptions that can be made to answer this important question. Of course, the answer is not going to be the same for all people, due to their lifestyle demands and preferences. Take the time to figure out how much money do you need to retire. The sooner you do, the better you will be as far as planning for retirement and saving enough money to retire the way that you want to retire.

The biggest problem that people have with figuring out how much money one needs to retire is a lack of foresight and procrastination. For many, retirement is decades in the future.   With current pressing financial needs, it is hard to think about such a far off date.

While financial experts disagree on the best ways to save on retirement, they all agree that the sooner one figures out how much money they need to retire and starts taking steps to save for retirement, the better.   This is because retirement savings compound and grow over time. Those that start saving for retirement when they are younger will have bigger gains and bigger nest eggs when they are ready to retire.

How To Determine How Much Money You Need To Retire

RetirementBefore develing into how to best save for retirement, let’s get down to the question at hand regarding how much money do you need to retire? While experts throw out statements such as you will need more than $1 million dollars to retire comfortably, these round numbers are of little use to most people.

To get started, figure out how much you currently spend each year to live your current lifestyle. If you take the approach of multiplying your current monthly expenses by twelve months, remember to add in annual expenses that you incur, such as what you spend to go on vacation or annual insurance renewals.

Your current total annual expenditures will give you a good starting point to figure out how much money you will need during retirement.   Typically, people need less money per year during retirement than they do during their working years. This is due to several reasons. First off, many people move to lower cost areas and/or living arrangements when they retire. Second, people save less money when they retire. Retirement savings for example is no longer an expense. Third, retirees tend to pay lower rates of taxes, since they do not pay payroll taxes and they are often in a lower income tax bracket than they were during their working years. Fourth, everyday expenses fall for retirees. They no longer have to spend money on raising a family or commuting costs.

Other expenses, such as medical expenses and food costs, will likely increase during a person’s retirement years. Retirees tend to need more healthcare services than those in their working years. Even with government healthcare programs, such as Medicare, available for retirees to help them offset medical costs, the sheer volume of medical services needed by retirees can causes an increase in medical costs. While a retiree may be able to save money on food, overall food costs should be expected to rise in line with inflation during a person’s retirement years. This will be true for many costs, such as entertainment expenses.

After adding and subtracting expected expenses during retirement, a typical retiree should find that it will cost them about twenty-five percent less to live during retirement versus their working years. This, of course, assumes that one does not decide to take expensive vacations around the world or take up an expensive hobby during retirement. If you have extravagant plans for your retirement, make sure you include them in your calculation regarding how much money you need to retire comfortably.

How To Save For Retirement If You Are Short On Savings

Money To Retire
If you calculate how much money you need to retire and determine that your expected retirement income will not meet your lifestyle needs, you need to start saving and investing money. The sooner the better! One of the not so well understood retirement investing principles is the fact that the earlier a person starts saving and investing for retirement, the more money they will ultimately earn, as the money compounds and grows over the years.   Starting ten years earlier can make a big difference in the total amount saved for retirement, once the time comes to retire.

If you are working for an employer that offers a retirement savings plan, such as a 401 (k) plan or a 403 (b) plan, put as much money as you can per year into the plan and invest it wisely in stocks or bonds that have a good annual rates of return. If your employer offers matching payments, make sure you are saving enough to capture their maximum matching amount.

Look beyond employer sponsored retirement savings plans and invest money in your own Individual Retirement Account (IRA). These accounts not only allow you to save and invest money for retirement, in some cases they also offer immediate tax benefits, since the government allows certain Individual Retirement Account contributions to be made as tax-deductible contributions, which lowers your current taxable income.

If you are invested in stocks for retirement, it is important to remain invested for the long haul, with your sights on retirement.   Let the stock market gyrations play themselves out. If you earn any dividends from the stocks you hold, reinvest them to increase your long term retirement savings.

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