We all dream of retiring one day, but have you considered if you have enough money in your retirement savings? The truth is many people don’t have enough money.
The problem is many don’t know how much money they actually need. Let’s take a closer look and see if you have enough.
When Do You Want to Retire?
The first thing you need to ask yourself is when you want to retire. Are you in your 30's and hope to retire in your 50's? Are you in your 40's and hoping to retire in the next 10 years?
This is really important because it helps you determine how much longer you have to put money into your account. If you find that you have less than 10 years, but aren’t close to your goal, you’ll know that you have to buckle down and put as much money in your account as possible.
What Will Your Expenses Be Like?
Will your house be paid off when you retire? Do you plan to have any debt? What are your medical expenses like? Do health problems run in your family?
You carefully need to determine how much money your monthly expenses will cost you. These are your everyday bills such as food, electricity, water, car insurance, cell phone service, internet service, etc.
What Do You Want to Do When You Retire?
Do you want to travel when you retire or are you the type that wants to stay home working on crafts?
What you want to do during your retirement will greatly affect how much money you’ll need in your retirement savings account.
How Much Will It All Cost?
Once you know what your bills and lifestyle will be like, you can determine how much money you’ll need each month. You need to consider that monthly amount will continue to increase throughout your retirement because of inflation. In other words, you’ll want to consider rounding up quite a bit to make sure everything is covered.
What Will You Receive in Social Security and Pension Payments?
Each year, you should receive a statement that tells you how much money you can expect to receive from Social Security each month. Add this to any pension payments you’ll receive from your company.
In the best-case scenario, this will be enough to cover your expenses. In most cases though, this will not be enough. You need to make sure you’ll have enough from your retirement account to cover the excess.
How Long Will You Live?
Let’s say you plan to live 25 years after you retire. This means you’ll need to consider how much money you’ll need each month after Social Security and pension payments.
Take this amount and multiple it by 300 months (25 years). This will be the lowest amount you need in your retirement savings account. For example, if you know that you’ll need $2,000 a month from your retirement account, you’ll need at least $600,000 in your account.
Those numbers can seem impossibly high, especially if you don’t have much money in your retirement savings account. However, knowing how much you’ll need can be a step in the right direction.
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Why Saving for Retirement is More Important than Saving for College
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