How Much Do I Need To Retire Comfortably?

When someone asks…how much do I need to retire comfortably?…there is a standard calculation you can make that will allow you to get a reasonable guide about what you’ll actually need financially to get through your golden years.

However, today, people are living a lot longer which makes calculating numbers for retirement planning just a little more difficult. For example, experts now tell us that we could expect to live for at least 25-3o years past our retirement age. So if you retire at 65, then making it to 90 looks a reasonable chance.

How Much Do You Need To Retire Comfortably?

In this article, we will present five steps which you can use to calculate your likely retirement financial plan.

1. First of all, look at your living expenses currently and your current income.. Financial experts suggest that work on the assumption that you will need between 70-80% of your current income to live comfortably. This is assuming your health is good and the following steps have been taken care of:

  • You have no home mortgage obligations
  • No expenses related to work
  • Your kids will be on their own without your support
  • You will receive Social Security as part of your retirement
  • You have no debt

2. Factor in other expenses you intend to incur. For example, if you like to travel and take annual vacations, your health care costs, visiting kids if they live away from you such as interstate and you might also contemplate moving to another area or downsizing to a smaller retirement home which will cut down maintenance expenses.

You may also consider you want to keep working in retirement and this also needs to be factored in. Today, it’s a growing trend and people are continuing to work in some form not just for the extra income, but many say it gives them a sense of self worth.

3. Inflation might be a major factor. Living costs rise each year and trying to work on an actual increase figure is difficult. Always factor in the worst case scenario so maybe but for a yearly inflation increase of 10%. The reason you want to do this is that your first year in retirement is going to be cheaper than your tenth or fifteenth as inflation forces price of goods and living expenses up.

For example, if you are earning $60K a year now and go on the 75%  figure it will need you to live comfortably on in retirement, then that’s $45K. Let’s assume your 45 now and retire at 65, $45K in twenty years time is going to be worth a lot less than it is now. Can you see what we’re getting at?

4. You’ll need to figure out how long you will live on for after retirement. I know that sounds a little morbid but it’s something you need to do. It will help in figuring out how much money you need to retire on in the final analysis. So what age are you planning to retire and how long do you think you may live on for. Here’s a useful life expectancy calculator you can use.

5. Above all, have a plan. A budget plan to get you going is vitally important. Why not start putting away 10-15% of your current income now just for your retirement plan. Then talk to a financial advisor for more precise advice. Here’s a retirement calculator that can give you a good “guesstimate” of what you’ll need in total on retirement.