From an overall perspective, retirement planning has not changed all that much over the years. After working your whole life, you set aside some savings, and then you retire. However, the mechanics may still remain the same, but savers today may be facing some challenges that were not a concern to previous generations. Firstly, life expectancy is longer which goes without saying that you will need more money as you continue advancing in age, potentially into your 90s. There are also other aspects of retirement panning that we will cover in more details through the guide below. Find out more before moving to Keller, TX.
Saving for Retirement
One of the toughest feats to take on during retirement planning is thinking about life when you are already in your 70s. Many people get overwhelmed when it comes to saving for a future that is still unknown. In the end, they may end up not saving for retirement at all. Thankfully, with a retirement plan, you can stay on track. First, you need to think what you aim to achieve in retirement. We do not know for sure what the future holds but we can come up with a rough idea. Based on the average inflation rate in the U.S. over the past century, the figure was 3.22%. When combined with your monthly expenses that include healthcare, food, and housing costs, you can gauge how much you will need to lead a comfortable retirement.
What to Calculate for Retirement Savings
- Healthcare costs (estimates show that roughly $295,000 is needed for a couple, excluding long-term care)
- Housing costs, including mortgage or rental, water, heating, and maintenance
- Entertainment, including movies, restaurants, plays
- Day-to-day living such as clothing, food, and transportation
- Possible life insurance
- Travel, including hotels, flights, and gas if driving
The magic number to hit for a golden retirement? Recently the figure has climbed to $2 million.
How to Start Saving for Retirement
Starting early is essential even if it means setting aside just $50 per month while you are in your 20s. However, if you do not want to wait until you are in your late 30s or 40s before tackling retirement, you will need to set aside a lot more than that into your retirement account so that money can grow. The longer you wait, the more you might have to save every year which can be highly challenging.
Things to Consider When Getting Started with Retirement Savings
- Create a Budget – Your current budget should include all your current income and expenses. You should have a rough idea as to how much you will need to save per month, depending on your retirement goals.
- Set Automatic Transfers – This is to ensure you do not forget to save some money per month into your retirement account. It can reduce the risk of you spending away that money.
- Create Emergency Account – This account is where you will tap on for an unforeseen circumstance. This will prevent you from touching your retirement account.
- Pay Down Debt – You should aim to be debt-free by the time you reach 65 years old. This includes credit card debt, car loan, and mortgage.