Money, Health, and Other Things

Educational Blog in the Area of Family and Consumer Sciences for the Middle Peninsula

1 Comment

[Replay] Planning for Retirement, Part VI

Over the next few weeks, we’ll revisit our series on retirement planning! This week, we’ll return and continue our discussion on estimating how much you need to save for retirement.

Last week we discussed ensuring that your retirement savings are invested in a manner that helps those savings grow, without being too risky for your personal risk tolerance. Once your retirement savings are being put in the appropriate investments, it’s time to look at current and future retirement resources. How much are you saving each year for retirement? How much do you already have saved for retirement? How many more years do you plan to work, or alternatively, when do you plan to retire? When you retire, are you planning to do any part-time work, or “fully” retire?

Once you’ve answered all of these questions, you can estimate how much money you’d have at retirement. But how do you know if that will be enough? To answer that, you need to look at how much pre-retirement income you’ll need at retirement. As mentioned last week, a typically household needs anywhere from 70% to more than 100% of pre-retirement income. How much you’ll need will depend on what type of retirement you anticipate. Do you plan to do a considerable amount of traveling? Are you planning on downsizing your home? While many expenses may decrease at retirement – auto insurance, gas, and other auto expenses, lower utilities and housing costs for a smaller home, and often decreased income taxes – many expenses may increase – higher medical and health expenses, and higher travel and entertainment spending.

Lastly, you need to look at how many years of retirement income you’ll need – which brings up the darker question, how long to you expect to live? According to the CDC, for those who reach the age of 65, the average life expectancy of men is 83, and for women is 86. Think about your current health, and also consider being safe and planning for more retirement years than you estimate.

We’ll return next time to conclude our discussion on estimating how much you need to save for retirement, and discuss strategies to make your retirement money last.