Retirement – It’s sooner than you think! (Honestly)
Many people hear “retirement” and think: what? 401K? Roth vs Traditional IRA? Stocks, bonds, mutual funds? They?
Or do many people save money according to the suggested amount and then just hope that when retirement comes around it will all work out?
One report I read estimated that 66 million Americans have saved a whopping $0 for retirement.
Many people still think that there could be a thing called Social Security when they retire. Social Security: As of 2004, the average annual Social Security retirement benefit is about $11,000. That’s not much to live for folks. Also, we all periodically hear the news that there may not be any Social Security available when we get older and need it.
And as one more wake-up call, I found a calculator that estimated (without Social Security):
- a couple at 40
- contributing $90k year (together)
- with very modest investments
you would need to save an additional $2,690,000.00 (yes, over 2 million) to retire at age 65, OR: plan to work an additional 29 years!
Now, before you get overwhelmed and click through to another article, let’s put our heads together and just cover some very basic startup basics.
1) Standard of Living – You need to know what standard of living you will want to live at in retirement.
2) Basic Living Expenses: You’ll need to calculate the cost of basic living expenses (at that level), ie electric bill now $200 = what in 2030?
3) Hobbies and leisure activities: Know what kind of hobbies and leisure activities you will be keeping busy with and how much they will cost at the time.
4) Family Visits/Travel: Keep in mind that more and more children move as they grow up. So while they work out of state, YOU may have to travel to see them. Plan for these costs.
5) Convalescent care (nursing home costs) provincially run about $100/day on average. You’ll need to multiply that by the same 4% inflation rate. Then multiply it by the number of years before you may need it, to approximate how much you’ll have to pay for your home when you need assistance. Truth be told: WE need to plan to handle that cost ourselves, instead of thinking that our children will be able to bear that kind of additional cost.
You will need to add annual amounts. You will need the approximate annual cost of living (at the desired level) during regular healthy retirement. And you will need the full yearly amount of costs for living in assisted living or full care facilities (for each: you and your partner).
Multiply each annual amount by the number of years you could be living in that circumstance. Example: Retire at age 65. Live a healthy retirement: 15 years (ie 15 x the annual cost of healthy living). Assisted living: 8 years (ie 8 x annual cost of living in care).
You now have two totals that, when added together, equal your estimate of the total dollar amount you will need to live on after you retire. You are NOW ready to start planning your investments so that you can achieve that TOTAL number by the time you retire.
Here are some tools to help you now that you’re ready to take the first step:
USA Today Retirement Cost Calculator: [http://www.calcbuilder.com/cgi-bin/calcs/RET2.cgi/usatoday]
Motley Fool Withdrawal Area: [http://www.fool.com/retirement.htm?source=PFinAg]
Metlife Retirement Area: [http://www.metlife.com/Applications/Corporate/WPS/CDA/PageGenerator/0],1674,P1946,00.html
HUGE About.com Retirement Resource Area: http://www.retireplan.about.com/
Until next time, all the best,
Kate