How much money does it take to retire?
Planning for retirement is different for everyone. Plan ahead and take these pieces of advice to ensure a comfortable retirement.
According to the National Financial Capability Study (NFCS) for 2015, co-released by the Financial Industry Regulatory Authority (FINRA) and the Global Financial Literacy Excellence Center, over 50 percent of people surveyed spend as much or more than they earn. In other words, over 50 percent of people are not putting money aside for savings because they are spending everything. A whopping 39 percent either could not come up with $2,000 for an emergency or did not believe that they could. Emergencies aside, how much money are you going to need to retire? Should you rely solely on Social Security as many of the above-mentioned may have to do?
It depends. When experts talk about dollar amounts needed for retirement, they often use a percentage of your current income to help calculate your future needs. This means that if you want to fund your retirement, you will need to have an income at retirement that is at least a certain percentage of your current income. The percentages that I have heard range from 60 to 80 percent. So if you currently live on $3,000 per month, you would need anywhere from $1,800 to $2,400 per month at retirement to match your current lifestyle.
But what if the money is not available to you when you retire or it is insufficient to meet your needs? You may require a combination of savings and Social Security benefits to retire comfortably. Therefore, it is important that you assess your current situation:
- Do you have a monthly spending plan?
- Do you have excessive debt?
- Do you rely on credit for unexpected expenses?
- Do you have specific, measureable, achievable, relevant and time-sensitive goals?
- Will some of your debts be carried into retirement?
Once you have assessed your personal situation, you can use a Ballpark Estimate worksheet to see a rough estimate of what you will need to live comfortably in retirement. The bottom line: you need enough money saved up to draw a monthly “paycheck” or a combination of savings and benefits to make up a monthly “paycheck” in order to retire. Hopefully now you see how important it is to know what your monthly needs consist of. You may be one of the folks who never got around to saving for retirement, but don’t be one of the folks who bury their heads in the sand and fail to make a plan.
Start now where you are, set goals and make a plan. MI Money Health has many good resources and tips to get you started on its Saving and Investing page, including tips for beginning a savings plan whether you are in your 20s, 30s, 40s, 50s or even 60s and beyond. Making financial changes takes time, patience and discipline. Sometimes it helps to have help from a professional. To contact an expert in your area, visit http://expert.msue.msu.edu, or call 888-MSUE4MI (888-678-3464).