In this installment of our Retirement 101 blog series, we’ll discuss ways to determine how much income you may need in retirement.
It can be a daunting undertaking, but it’s important to have an idea of how much you will need. That way you can more easily plan how much you may need to save and how best to allocate your assets in order to meet your income goals.
There is a rule of thumb that says you will likely need 70% of your current income in retirement. So, if you make $100,000 per year now, you will need $70,000 per year then. But this rule of thumb may not take everything into consideration. Perhaps you want to live more lavishly in retirement, or perhaps you still have kids in college when you’re “retirement age.”
Whether you use that rule of thumb or a retirement calculator to help you determine what you’ll need, you are going to have to consider a number of factors (and have the information at the ready) to get to your unique number.
Social Security
People often forget to factor in how much Social Security they may receive when considering how much income they’ll need in retirement. While it probably won’t be enough to meet your needs, you will likely receive some sort of benefit. Each year, you should be receiving a statement from the Social Security administration that gives you an idea of what your monthly benefits will be in retirement. Use this as a starting point for income you will receive and look at your investments to supplement it.
Longevity
According to the Centers for Disease Control, the average woman born in 1970 who reaches the age of 65 will likely live to be 82, while the average man will likely live to be 78. This is wonderful news, but it does impact how long you may be in retirement and how much money you will need. And it is important to remember that these are averages, which means that many people will live longer than these estimates – so your retirement could last 20-25 years or more.
Lifestyle