Ask Yourself These Questions About Your Retirement Income
How much money you need in retirement depends on many variables, in addition to how much the professionals suggest you save each year. Each person will need their own egg, depending on priorities, lifestyle and other assets.
If you don’t already have a goal of how much money you’ll need in retirement, according to Jason Mengele, a certified financial planner in Kiplinger, here are four questions to ask yourself to get through it:
1. At what age do you want to retire?
Early retirement is a dream for many, but it also matters for most retirement accounts and benefits.
Retirement before 59 and a half means you won’t be able to access your IRA or 401 (k) funds without penalty (although you will be able to use Roth IRA contributions). Social Security benefits will not be paid until you are 62, but it is wise not to collect them for a few more years — you will only receive a small fraction of your benefit at age 62, which will increase year by year until you are “ fully eligible”. pension “. age ”at 66 or 67 years, depending on your year of birth.
And “you also want to take your spouse’s age into account,” Mengel writes. “If you and your spouse stop working, you are likely to lose any employer-sponsored benefits, so you will be paying for basic necessities like health, dental and life insurance out of your own pocket.” If you are under 65 years and you are not yet eligible for Medicare.
Not everyone can wait to retire, but planning what age is most likely for you and your spouse will not only give you a better idea of your retirement and how much you will have to save, but you can also create cash. a pillow that will keep you secure for years to come before you can tap into your retirement accounts and social security.
2. How long will you be in retirement?
A painful question, but an important one to consider. How long do you expect your pension to last? Now that Americans are living longer, your pension could stretch over several decades.
“According to the Social Security Administration , a man who has reached the age of 65 today can expect to live on average to 84.3 years,” Mengel writes. “And a woman who turns 65 today can expect to live on average to 86.7 years. About one in four 65-year-olds today will live to be 90, and one in 10 will live to be 95 years old. ”
And you will have enough money to survive.
3. What will be your expenses?
What costs do you expect from the previous two questions? Are you going to stay in your house? Rent? How about driving? Daily expenses? Are you planning to travel? How is your health?
“You can and should make a preliminary budget to figure out how much you need to live the way you want,” Mengel writes. You can’t plan everything, but pondering how you hope to live in retirement will give you a better idea of how much money you need to save now.
Plus, don’t forget inflation. Even if you ate the same thing every day, you will spend more on it in subsequent retirement years than in your first year. “And Social Security’s Cost of Living (COLA) adjustment is notoriously inadequate, especially when it comes to basic costs such as prescription drugs, utilities and rent,” Mengel writes.
4. How much can you save now?
Once you get an idea of the first three questions, you can see how your current savings are accumulating. If you foresee a large gap in retirement income – the difference between your retirement income and your actual spending, Mengel says – then it’s time to make some adjustments.
“If you’re not yet retired, you can make adjustments to help deal with the projected deficit — by working longer, saving more, making changes to your portfolio and / or other strategies,” he writes. “But once you retire, it gets much more difficult.”
Again, saving up for retirement isn’t easy – we’re all trying to make it work at its best. But by keeping your long-term plans and dreams in mind, you can make changes right now that will help you in the future.