Preparing for Retirement: This Is How Much Money You’ll Need
When planning for retirement, most Americans think that they should shoot for the $1 million mark. Is that really true?
The reality is that $1 million may be more than some need and for others, it could be way below the mark. So, how do you calculate how much you’ll need when preparing for retirement? Furthermore, how do you reach that goal?
We’re going to give you the scoop on what it takes to retire, along with a few key retirement tips. (Hint: it’s not just about putting money into a savings account.)
Read on as we address your burning questions about preparing for retirement.
How Much Money Do You Need to Retire?
We’ve already acknowledged that $1 million is not the magic number for everyone. So, what should you shoot for?
You want to think about retirement in terms of income. That might mean your pension and the amount that you withdraw from your retirement accounts. It might mean how much of your savings account you can spend each month.
To calculate your retirement income, think of your current income and subtract 20-30%. In other words, if you make $100,000 per year now, you’ll want a retirement income of between $70,000-$80,000.
The idea is that by retirement age, you may not have the same cost of living as you do now and won’t need as much to get by. For example, you may live in a house with a fully paid off mortgage. However, you will still want to have plenty of money for necessities, travel or entertainment, and emergencies.
How Can You Start Preparing for Retirement?
Should you start setting aside part of your paycheck every month? While this is a useful tool, we don’t recommend putting it all into a savings account. Instead, you want to invest at least part of that income so that your money starts working for you.
Retirement accounts like 401ks and IRAs are a great place to start. One great retirement savings strategy involves more diversification, allowing you to invest in things like companies and gold. Because you’re planning for the future, not all of your assets need to be liquid at this time.
Let’s say you’re not only worried about your own financial future. If you want to plan a safety net for a partner, children, or other loved ones, consider taking out a life insurance policy. This will protect your loved ones from accruing a large amount of debt in your absence.
Retirement Isn’t Just About Your Savings Account
You may not need $1 million to retire and, more importantly, you won’t have to set aside all of that money from your own paycheck. Preparing for retirement does involve making smart investments so that your money can start working for you.
We all dream of a life of happiness, wealth, and stability. We’re here to help you turn that dream into a reality. Take a look around to learn even more about how to achieve the life you’ve always wanted.