Are you unsure of how much money you will need in retirement? This is a very common concern for Americans as they approach retirement age. This blog will give you some tips on how to begin estimating your needs in the future, as well as some tips on how to increase the longevity of your savings.
How Much Should I Spend?
One of the easiest ways to judge how much money you will need in retirement is to take stock of how much money you need right now.[1] Track your expenses and see how much money you spend on different aspects of your life. If you track your expenses for at least a few months, you should be able to get a sense of how much money you spend on average. Understanding your budget is the first step to understanding how you can replace your paycheck in retirement.
But also understand that your expenses and spending patterns can and may change in retirement. If you have a mortgage that you plan on paying off before you retire, then you don’t have to factor that into your retirement expenses.[2] The same goes for outstanding car payments or loans you plan on paying off before retirement.
How Much Income Will I Have?
Now that you have a sense of how much you’ll need to cover your living costs in retirement, you can determine what your savings should be invested in to generate enough income to cover those costs. Add up all of your income from rental properties, expected Social Security, pensions, and other investments, and compare that estimate to your monthly costs. If your costs outweigh your income, you may need to think about exploring other investment options, adjusting your lifestyle, or rethinking your retirement timeline.[3]
How Many Years of Retirement Should I Have Saved For?
On average, men who retire at 60 years old can live another 22 years. On average, women who retire at 60 can live another 25 years.[4] And while those numbers are estimates, they can at least give you a sense of approximately how long you should be considering saving for.
Should I Prepare for Long-Term Care?
Even though you may not need long-term health care, such as a nursing home right now, it can be a major retirement expense in the future.[5] There are options for insurance for long-term care that you should consider. If you do decide to get a plan, the cost of that plan will also have to be factored into your expenses in retirement.
How Can I Maximize the Longevity of my Savings?
Working longer is probably the best way to make sure your retirement money lasts as long as possible. Every year that you aren’t cutting into your savings is another year that you are bolstering your funds. You’ll be able to add to your retirement rather than withdraw from it. Additionally, every year that you delay claiming Social Security between the ages of 66 and 70 increases your Social Security benefit by 8%. [6]
Understanding the components of a comprehensive retirement plan is only the first step in executing it. It takes doing the work and knowing the strategies available to you to properly execute a strategy that will work for you. Click HERE to sign up for a complimentary review with us at LakePoint Advisory Group to take that next step in executing a successful retirement strategy.
[4] https://www.cnbc.com/2023/01/16/longevity-can-have-a-greater-impact-on-retirement-money-than-inflation.html
Lake Point Advisory Group is a tradename. All services provided by Lake Point Advisory Group investment professionals are provided in their individual capacities as investment adviser representatives of Mercer Global Advisors Inc. (“Mercer Advisors”), an SEC-registered investment adviser principally located in Denver, Colorado, with various branch offices throughout the United States doing business under different tradenames ,including Lake Point Advisory Group.
This material is provided for informational purposes and is not an offer to sell or a solicitation of an offer to buy an interest in any security or to engage in any investment strategy. Such an offer may only be made at the time a qualified offeree receives a confidential private offering memorandum or other appropriate disclosure. This report is intended as a summary; it does not purport to be complete. Information contained herein is believed to be accurate and/or derived from sources which we believe to be reliable; however we do not warrant the completeness or accuracy of such information. Opinions expressed herein do not necessarily reflect those of Lake Point or Mercer Advisors. You should not construe this presentation or any other communication received in connection with Lake Point as legal, accounting, tax, investment, or other advice. You should consult with your own counsel and advisors regarding such matters. Past performance is not necessarily indicative of future results. No representation is made that any investment will or is likely to achieve the same or similar results in the future. Investments cannot be made in an index. Alternative investments are subject to greater risks than those associated with traditional investments and are not suitable for all investors.
