When most people start getting into their fifties, they begin to think about retirement. While some people love to work and prefer to work until the day they can no longer do it, many of us would prefer to stop working as soon as possible. The question for those who want to retire inevitably centers on how much money they will need for retirement. The younger you are when you start thinking about your retirement the better. That way you can make sure you are on track to meet your goals. If you find you’re not on track, the more time you have to get back where you should be heading. When it comes to figuring out how much money you’ll need for your golden years there’s no magic number here. Here’s what you need to do.
· Calculate your Assets: Figure out how much money you have in the bank, all your retirement accounts, the stock market, and any other investments; like real estate for example. This will help you determine if you have enough money to fund your golden years.
· Decide what Standard of Living you Want to Enjoy: For some people this will be easy. If you want to keep your present standard of living it will make your calculation much easier. You just have to figure out how much money you will need to amass, adjusted for inflation, to cover your expenses during your golden years.
· Determine the Approximate Length of Your Retirement: Now that people are living much longer, they are having to figure out how they can fund a much longer period of retirement. Most people figure for 20-25 years of retirement living. You’ll need this figure so you can see how much money you’ll for your retirement years.
· Decide When you Wish to Retire: If you’re 50 years old and are planning on retiring when you reach 65 you’ll have to figure out if you will have enough money saved to achieve the standard of living you wish to live on. If you find that there’s going to be a shortfall you’ll have to see what you can do to make your retirement date, or push it back a few years or you may want to work part time during part of your retirement.
More Complicated than you Think
If you are living on $100,000 a year now and wish to maintain your present lifestyle during your 20 years of retirement, the simple calculation suggests you will need $2,000,000 saved when you retire. If you are 50 years old and have $500,000 in assets, you’re probably going to be short some. However, you cannot just make a straight calculation using 20 years times the $100,000 because you haven’t accounted for inflation which historically is about 3.2%. You’ll have to compound that over the period of your retirement. There’s a lot more to it than that though. Just Google retirement calculator on the internet and you’ll find pages of calculators and advice. I recommend you find one that is thorough and easy to understand and start from there. After you go through a five minute process you’ll be surprised to find you now know exactly where you stand in terms of getting ready for retirement. Keep in mind, the earlier you do this the better off you’ll be, especially if you find there you’re going to have a shortfall. The earlier you find out about a shortfall, the better chance you’ll have on getting back on track. The calculators are free and just may save your golden years.
Editor’s Note: Brian Legault is a Social Media Coordinator at SelectQuote.com, America’s #1 Term Life sales agency. We work with only highly-rated, rock-solid Life Insurance companies, and lobbies on your behalf to keep pricing fair. Selectquote term life rates are available upon request.