There’s no time like the present to start planning for retirement. One of the first steps to retirement planning is estimating how much income you’ll need to be financially secure in your retirement years.
As you start – or continue – charting a successful, sustainable future course, here is a roadmap to help you estimate your retirement income:
Invest a minimum of 15% of your income.
A standard rule of thumb for building wealth is to invest a minimum of 15% of your household income. This 15% includes options like an IRA, Roth IRA, mutual funds, 401(k), 403(b), and more but should not contain employer-matched contributions.
Develop a list of everyday retirement expenses.
It’s essential to assess your spending expectations based on the lifestyle you want in your future. From inflation to an increase in health care and insurance as you age, there are factors to consider that may impact your list. Create a comprehensive list of expenses to see how much income you’ll need during retirement to keep your budget on track.
Common retirement expenses include:
Food
Clothing
Housing
Utilities
Transportation
Travel
Taxes
Investments
Insurance
Healthcare costs not covered by insurance
Generous giving
Recreation
You may even be able to grow your savings faster when you achieve Money Milestones like paying off your mortgage early. Having a comfortable cushion will alleviate these factors as you build wealth throughout your financial freedom journey.
Identify your retirement income sources.
Another key to a successful retirement plan is identifying all your income sources. This can include a pension from an employer, Social Security, a 401(k), or other investments. If you plan on working during retirement, your earnings will be another source of income.
Bridge the gap of any income deficit.
Even after building your wealth, there’s a possibility you’ll need more money if you’re coming close to retirement and not at the goal you want to be. Here are a few recommendations to ramp up your savings:
Work part-time during retirement for extra income
Consider delaying your retirement for another year
Prioritize your wants vs. needs and cut non-essential expenses
Reevaluate your retirement expectations
Speak with a financial advisor.
You don’t have to go it alone on your journey to financial freedom. We recommend speaking with a financial advisor to ensure your estimates are realistic and accurate as possible. An advisor can help you fine-tune your money management strategies to retire confidently.
Want to see if you’re saving enough? Punch in the numbers using our free Retirement Calculator to see if you’re on the right track to meet – and exceed – your savings goals.
Creating a retirement plan varies from person to person. It depends on your specific needs, but saving early, investing, and speaking with a financial advisor are three ways anyone can plan for retirement.