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 to 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 include any employer matched contributions.
Develop a list of common retirement expenses.
It’s important to assess your spending expectations based on the type of 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 fluctuate 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:
- Health-care costs not covered by insurance
- Generous giving
You may even be able to grow your savings faster when you achieve 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 so you can retire with confidence.
Want to see if you’re saving enough?
Punch in the numbers using our free Retirement Freedom 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 and depends on your specific needs, but saving early, investing, and speaking with a financial advisor are three ways anyone can plan for retirement. Want to learn more about building wealth? Explore the Financial Freedom Education Center by FAIRWINDS for personalized education courses, retirement planning webinars, and more.