How much do I need to retire? This is a question we all ask ourselves at some point. Calculating retirement needs will vary for each individual. There are many factors to consider such as where one plans to retire as well as the kind of lifestyle one wants to live during this time. Most of us plan to live modestly during retirement, but it is still important to consider all options and make choices about what type of retirement plan will best suit our needs.
An Estimation of Retirement Costs
Many of us may plan to reach retirement age around 65, but some may decide to retire much earlier at approximately 55. When we ask this question, we must look at our current situations in terms of age and income. For instance, a person in his or her early 30s has only about 30 years to save for retirement. A 32 year old with an income of about $40,000 a year who wants to retire at 65 and have 100% of his or her retirement income needs to save nearly a million dollars to retire. Interestingly, if one wants only 50% of that, he or she needs to save less than $200,000.
Financial Necessities During Retirement
When we ask ourselves how much do I need to retire, we should consider the costs of the basic necessities.
Housing is a must, so if one wants to invest in a home or go to a retire community, he or she must plan accordingly.
The person who has $200,000 for this time may decide to use some of that income to buy a home or rent property to spread his or her assets over time.
Of course the cost of food should be considered when we ask how much would you need to retire. It is less expensive to cook meals at home than it is to dine out on a regular basis. Taxes also need to be figured into the cost of retirement. Keeping track of monthly expenses such as toiletries, cleaning supplies and all those other necessities is also important. Even expenses one may not have considered such as recreational activities will need to be accounted for in some way.
Living in a low tax state such as New Hampshire may hold some appeal and alleviate some anxiety from that question of how much do I really need to retire. If one has extra income from sources such as pensions, social security and perhaps even a part time job, this will supplement any savings one has for retirement. Working with someone to choose some wise investments can also help us when we decide how much do I need to retire.
Retirement can be a frightening and uncertain prospect, especially when we try to calculate how much you need to retire. However, with a little planning, this prospect can be met with more confidence. Retirement can truly be a great experience and a culmination of what we spend our lives building.
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