“How much do I need for retirement?” It’s a common question asked by people of all ages. Some advisors like to quote a nice round number and say that you should have a million dollars set aside for retirement.
However, that number means nothing if it doesn’t fit your situation.
What you plan to do in retirement is what should dictate your retirement planning goals. This why building a retirement budget is one of the most important parts of the entire retirement planning process. Only after you have created a budget can you fully understand how much money you will need in retirement.
In this article, we will look at some of the important details to include in a retirement budget so that you can start saving for the life you have always dreamed of.
Determine Your Income in Retirement
The most important part of any budget is to determine how much money you actually have to work with. This can be difficult for some because you may not have a clear picture of how much you will have saved when you reach retirement. Still, there are some methods to get a fairly accurate number.
First, you should use the social security benefits calculator provided by the government. This will give you an idea of how much you will earn from social security. Next, consider how much you have saved over and above social security. From that amount, you can expect to be able to safely withdraw 4% per year.
You now have a rough idea of what your retirement income will look like.
Account for Increasing Healthcare Costs
As most people age, they begin to spend more on their health. Unfortunately, a lack of planning for health care expenses leads to serious financial hardship for many families.
One important expense you should include in your retirement planning budget is health insurance. Your insurance premiums can help soften the financial burden of a significant medical expense. In addition, you may want to include expenses for home upgrades that may be needed if you plan to stay there as you age. Wheelchair ramps, stair lifts, and other expenses may have to come directly out of pocket depending on the type of health insurance coverage you have.
How Do You Want to Spend Your Time?
Once you enter your retirement years, you will have the time to do the things you have always been dreaming of. The whole purpose of retirement planning is ensuring that you can enjoy all of the hard work you have put in. So, what do you want to do and how much will it cost you?
If you hope to take an annual safari trip then include that expense as a part of your budget. What if you plan on buying a golf membership at the fancy course? Include that expense as a part of your budget. Sometimes it can be hard to plan for your big retirement dreams. Putting those expenses into your retirement budget as part of the retirement planning process can make things a little more clear.
Bring Your Retirement Budget Together
Once you have figured out the important details above, add in your essential expenses like housing costs, debts, groceries, and bills. Once everything comes together, you should have a clear picture as to where you sit when it comes to retirement planning.
If you would like a personalized look at your retirement budget, health insurance needs, and professional guidance on how to get where you need to be, contact our financial experts today at Mooney Lyons. We will take the confusion and uncertainty out of retirement to help you live the golden years you have always dreamed of.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.