How Much Do I Need to Retire at 55 Calculator
It's never too early or too late to start thinking about how much you'll need in retirement. Using a retirement need calculator can give you an estimate of the amount you need to have stashed away by the time you retire. Here's a closer look at what that entails.
Often the first step in calculating how much you'll need when you retire is determining how much of your income you'll need to live on each year. Some experts state that you'll need a smaller percentage of your annual income because you'll no longer need to spend money on work-related expenses, such as gas and transportation, lunches out or work clothing. Previous estimates stated that you only needed about 80 percent of your pre-retirement income. However, now estimates show that more than half of families spend more after retirement than before, according to the Employee Benefit Research Institute. For this reason, it's smart to err on the side of caution and have 90 to 100 percent of your pre-retirement income available, as recommended by The Motley Fool.
Recommended Amounts to Save for Retirement
So, what does that look like in dollar amounts? In general, financial experts recommend saving between $1 million and $1.5 million by the time you retire, according to AARP. This amounts to about 10 to 12 percent of your pre-retirement income. If you have that amount saved, you'll generate about $40,000 per year in interest. Every person's financial situation and needs are different, so it's best to calculate estimates based on your individual needs.
Determine Your Spending Budget
Working with estimates will only take you so far. You'll want to be a bit more precise to ensure that you have enough to meet your needs in retirement. Using a retirement budget calculator can help you figure out what your spending needs are. The calculators take into account several spending categories, including housing, food and medical costs. Other spending categories to consider are:
- Taxes
- Insurance
- Travel expenses
- Entertainment
Income After Retirement
If you'll be receiving income after you retire, then you won't have to rely entirely on savings. Some people leave jobs with generous pension plans in addition to Social Security benefits. They'll be getting an income each month to help with their expenses. Other people retire from their jobs with a 410(k) plan and won't be bringing in additional income once they leave. A financial retirement planner can help you determine what your retirement income will look like.
If You Haven't Saved Enough
Many financial experts say to start saving for retirement as soon as you get your first job. When you're a teenager working at a fast food restaurant, saving for retirement is perhaps the farthest thing from your mind. Still, as you're establishing a family or getting started in your career, saving for decades later might not be at the forefront of your mind. However, as you get older, saving $1 million might seem like an impossible task in such a short amount of time. If you reign in your spending and start saving aggressively, you can reach your goal. You can double your savings in the last decade of saving if you have the right account with compound interest.
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How Much Do I Need to Retire at 55 Calculator
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