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How Much Money Do I Need to Retire?

retirement income

There’s not a one-size-fits-all answer to the question of how much money you really need to retire. Unknown factors, like how long you’ll live and whether you’ll face health issues in the future, combined with your desired quality of life make coming up with a simple answer impossible.

You can factor in some information to help you estimate how far your current savings will take you and whether you need to work toward saving more before you transition into retirement.

Statistically, retirees spend as much money during the first 10 years of their retirement as they did in the 10 years before they retired. It’s crucial to understand how much money you currently spend, so check your records for the past few years to get an average.

Many financial planners say that to maintain your quality of life in retirement you need to save between 10 and 12 times your annual income. This number may be higher or lower depending on where you plan to live, whether you’ll travel and the state of your health.

Make Your Savings Go Further

In addition to saving as much money as possible during your working years, it’s also important to eliminate as much debt as you can while you are still working full time.

2012 was the first year during which households led by people over 50 had more credit card debt than younger households. Those numbers continue to rise as seniors take on more debt to pay medical bills and support their lifestyle.

Talk to a financial planner about how paying off your mortgage, credit cards and medical debt would impact your ability to save in the short term. You may find that removing those debts from your monthly budget helps your savings go much further in retirement.

Revolving debts like credit card payments that are manageable during the years when you work full time can easily get out of hand as you transition into retirement. It’s important to simplify your finances before your income level changes.

Ramp Up Savings Goals

During the last 10 working years, it’s possible for most people to double the size of their nest eggs. If you don’t have 10 years before retirement but are committed to saving as much money as possible during your last few years of full-time work, it’s crucial to enlist the help of an experienced wealth advisor to make the most of your efforts. Compounding interest can double your savings in 10 years with a 7 percent interest rate of return.

Many financial advisors say those nearing retirement age should put away as much money as possible and cut spending if necessary. A 65-year-old couple has a 43 percent chance that at least one of them will need enough savings to see them through to age 95. Under these circumstances, you need to know how much money you’ll need to live the life you want in retirement.

While online calculators are a valuable source of information, they are no substitute for one-on-one attention from a seasoned wealth advisor who understands your individual circumstances.

Consider Assets

Working with a financial planner will help you understand your complete financial picture. Many seniors overlook the value of real estate, certain types of investments and even life insurance policies. They also may underestimate the costs associated with maintaining certain assets.

Many people nearing retirement age underestimate the value of Social Security when forecasting their expenses and income in retirement. Depending on your income level during your working years, Social Security benefits for a single person could add as much as $33,456 per year to your post-retirement income for the rest of your life.

Protect Your Retirement Savings

Nearly three-quarters of Americans will require some type of long-term care during their retirement years. Private nursing homes cost nearly $100,000 per year, and 44 hours per week of in-home care can easily cost $50,000 per year. Even a hefty nest egg is no match for the high costs of long-term care.

You have several options for protecting your retirement savings in the face of these high costs, however. Protecting your assets as you age is possible with the help of an experienced wealth advisor. Of course, how much you’ll spend on health care in retirement is a guess. Some financial institutions estimate that the average couple will spend $250,000 on medical expenses in their later years.

The best time to consider options for handling long-term care costs is before you need medical care. Long-term care strategies are accessible to many seniors who are still in good health.

Ross Wealth Advisors can help you clear up confusion about saving for retirement. They have extensive experience with building and protecting assets for seniors nearing retirement age. No amount of research and reading will give you the personalized answers about planning for retirement that you want and need.

Generating income for the retirement lifestyle that you’ve dreamed of is within reach. Our team of experts understands the intricacies of estate planning, Medicare, Social Security, insurance, real estate and taxes. They are ready to help you make a plan to reach your retirement goals.