How do You Estimate Your Retirement Income Needs?May 24, 2021
Planning for a comfortable retirement depends on carefully identifying your expenses and projecting how much you’ll need to spend. How do you go about doing that? We have some tips here.
Planning for your retirement? Not sure where to begin? Well, for starters, you’ll want to estimate how much income you’ll need to have a comfortable life. We have some tips and tricks here to help you get started.
Think about your expenses
Projecting your retirement expenses can be tough. It’s wise to identify all your expenses. Common retirement expenses include obvious things like food, clothing, housing, utilities, transportation, healthcare but also debts, education (college expenses), gifts (charitable and personal), savings and investments, pets, nursing home costs and of course recreation!
Your expenses will change over the years, and cost of living will go up over time, but it’s best to have a general idea of what you’ll need to cover your lifestyle. It’s wise to build a cushion to protect against variables.
Think about the length of your retirement
Although you cannot pinpoint your exact life expectancy, there are tools to help you estimate. These include government statistics, life insurance tables or a life expectancy calculator. These tools take a look at your age, gender, race, health, lifestyle occupation and family history to estimate how long you’ll live.
Your current income is a good base line
It is helpful to use your current income as a starting point to determine how much you will need. Your current income sustains your current lifestyle after all. Of course there will be certain expenses you’ll no longer be on the hook for, like payroll taxes for example, but using it as a benchmark is helpful.
Think about income sources
Pinpoint what sources of retirement income will be available to you, whether that’s a traditional pension through your employer that pays you monthly benefits, social security benefits or a 401(k) or other retirement plan.
What happens if you come up short?
Are your income sources sufficient? If not, there are a few other things you can do to meet your needs including moving assets into investments, working part-time during retirement for extra income or delaying your retirement until you’re more financially stable.
We can help you assess your retirement needs. Contact us.