How Much Money Will You Need To Retire?

The good news is that the average life expectancy has risen by about 20 years over the past few decades. The bad news – you will need more money to live out your nice, comfortable retirement dreams. How much will you need? More importantly – how can you make this happen?

Saving money for your retirement sounds good in theory, unfortunately, it’s not as easy as it sounds. Owning a home, raising children, basic living needs, the occasional vacation and unexpected emergencies seem to eat up any savings we may be able to accrue.

Company pension plans are very unstable and unreliable, so for most people, government programs are the only option for getting through the golden years. With the uncertain state of the economy, many people may not even be able to depend on that. On the up chance that Social Security is an option, the small monthly checks will not likely keep you in your current standard of living.

Investment Income is the Answer

Start early and invest regularly. This may sound impossible, especially when life seems to eat up all your of your disposable income, but it can be done. With a little creative budgeting, you can free up enough money to make small investments, which will grow into larger ones that can then be turned into a nice little retirement fund.

When you save for your retirement, you have to have set amount of money in mind. Experts estimate 60% to 70% of your current income. For example, if you make $45,000 a year and plan to retire at the age of 65, you will need about $500,000 in the bank to compensate for the difference between government benefits and your current income. Naturally, if you live longer than expected, these funds will run dry before you expire.

Since you don’t know how many years you have left, an exact dollar amount is impossible to predict. This makes saving that amount even more difficult. With investment income, this problem is eliminated because the money keeps flowing in regularly, year after year.

The first step is to clear up all your debt and cut down on your expenses as much as possible. Rent is a huge money hog. Owning your own home and paying off your mortgage long before retirement is a very good plan. This will free up several thousands of dollars annually. Living mortgage-free is one of the best feelings in life. And retirement is all about feeling good, right?

Calculate your monthly expenses. How much do you need on non-negotiable expenses such as utilities, insurance, taxes, etc and how much are you spending on non-necessities? Are there any non-essentials you can eliminate – cable TV, internet, eating out in restaurants or other entertainment? Do you have car payments or credit card bills? You have to pay your bills, but cutting out one little extra a month can add up to several thousands of dollars to invest.

Don’t Stress

Planning for your retirement can become an obsession. How much do you need? Where can you cut back to save more? Retirement is supposed to be fun and relaxing, but don’t let the stress of planning take the fun out of the here and now.

Living a happy and healthy life after 50 is all about balance. Eat a healthy, well-balanced diet, exercise regularly and keep your finances in check. Balance your fun and work, save money, spend what you need and just relax. The more you stress, the more difficult the situation will become.

When things seem too complicated or confusing, get the help of a professional. We can’t all be financial geniuses. A little advice from the knowledgeable team at InvestmentZen can go a long way to helping you on the road to comfortable retirement living.