As you plan for your financial future, you may be wondering…
How Much Is Enough To Retire?
To answer this question, we need to look at several factors.
First, consider that costs of healthcare have gone up in recent years. Secondly, basic costs of living rise each year, too. Finally, what are the “extras” you’d like to have or experience in retirement? You’ll need a complete picture of all your expenses so you can figure out how much income will be required.
It’s true. Coming up with the answer to “how much is enough to retire?” can seem difficult. Luckily, there is a way to make it simple. To start, look at what a typical year’s inflation rate is. Typically, experts use a 2% per year rate to account for increases in costs. In other words, each year, it takes about 2% more money to buy the same items you bought last year. Because of this increase, retirees should not only calculate how much income they will need now. But, you should also determine how much you will need in the future. For example, you can add 2% compound interest to your annual income needs. In this way, your income should be adjusted for inflation throughout your retirement.
How Does Inflation Impact Retirement?
As a case in point, let’s assume you need $50,000 per year to cover your expenses. If inflation is 2%, that means it will take $51,000 next year to pay those same bills. In 5 years, you’d be looking at around $55,000 to maintain the same lifestyle. And, in 10 years, you might expect your yearly income needs to be around $61,000. Fortunately, you can get help to find out how much is enough to retire. At Choules Financial, we can help you lay out all your income needs. In fact, we’ll take the time to review where your money is now, and options you can use to protect is. In addition, we can help you to generate an income for life. And, we’ll review the idea of inflation and help you find out if it may impact your goals.
You must consider
Your Budget & Costs of Living
Planning out your retirement budget is a key piece of the financial planning puzzle. Similarly, you should discuss your anticipated retirement expenses with someone who has experience in this area of finance. For example, our team works with clients to help them think through their possible living costs in retirement. First, make a list of everything you know you must spend money on each month. This would include things like housing, food, and transportation. Next, think about the little “extras” you may want each month. For instance, you may want a budget for dining out or charitable giving. Or, you may want a line item in the budget to save for trips, holidays, or home improvements.
Additionally, we recommend making a “miscellaneous” area in your budget. If you have unexpected expenses or small emergencies come up, this will help cover the costs. Also, if you don’t need the money, you can save it instead. A little padding in the budget can help you know how much is enough to retire comfortably.
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Protection Is The Key
Retirees seem to be running out of conservative places to put their money. CD’s and regular savings account seem inadequate. Pensions offered through employers have all but disappeared. Indeed, even those who work in government are needing to put more into retirement plans than before. Ultimately, may people arrive at retirement and discover that their income is less than they thought it would be.
On the flip side, stock market investments aren’t the right choice for some retirees, either. For example, if the stock market goes down, your account value does, too. Sadly, the 2008 and 2009 market drops caused many people to lose money. For those that were close to or in retirement, that type of dip in the market was major. Although the market recovered, some accounts did not. This is why our firm believes that all retirees should have protection as part of their retirement plan.
Protect Your Money & Retire With Enough
While you are still working, you may have a higher tolerance for risk. If you invested in the stock market to grow your retirement account, you have certainly seen some ups and downs. However, as retirement approaches (or, arrives!) many people look for ways to protect their money. The strategies you used to grow your money may not be the same ones you use to secure your money. Now, keeping your money protected may take over as the main strategy. At Choules Financial, we believe that protection is key.