After years of saving money for retirement, you’re probably asking yourself "How much do I need to retire?" Finding the perfect number isn’t easy—and that’s because the amount you’ll need to retire is unique to you. A recent Forbes article highlighted some common estimates, and these are just a few of the suggestions:
- $1 million to $1.5 million (AARP)
- 80% of your working income annually (The Motley Fool)
- 70% of your working income annually (CNBC)
- 60% of your working income annually (Fortune)
- 10 times your salary at age 67 (Fidelity)
To determine how much you’ll need to retire, figure out how much you’ll need annually and multiply it by the number of years you expect to be retired. Then, find out how much money you live off of now, and decide whether you’ll need more or less than that after your retirement. If you decide you’ll need $90,000 per year to live comfortably in retirement, then you can multiply that number by the number of years you plan to be retired (15), and you’ll have an estimate on how much money you’ll need to have saved in order to retire comfortably.
However, the exact amount of money you should have as a nest egg depends on a lot of factors, and no two retirement funds are the same. With this in mind, take a look at these important questions. The answers might help you figure out how much you’ll need to retire happily and healthily.
What will your retirement lifestyle be?
How you plan to spend your retirement will greatly affect how much you need to retire. Are you planning on living your golden years to the fullest by traveling the world and doing all the activities you never had time to do while you were working? If that’s the case, you might want to add a little extra padding to your retirement goal. However, if you’re looking to relax and live simply for the rest of your days, you won’t need to plan to save as much. As you plan for how much you’ll need to save for your retirement, consider your plans for the future. If you’re planning to spend more money, then it stands to reason that you might have to save a little more money, too.
What are your current (and expected) healthcare needs?
According to the Motley Fool, one of the biggest mistakes senior adults make when planning for retirement is forgetting to factor in healthcare costs. Because seniors are statistically more likely to experience major health emergencies, it’s crucial to include healthcare savings in your nest egg for retirement. If you don’t have a plan for healthcare, you’ll end up needing to spend more money in retirement than you anticipated. The Bureau of Labor Statistics suggests that healthcare spending for seniors is about $6,000 annually—so don’t forget to include a little padding when determining how much you’ll need to retire.
What are the benefits of a retirement community?
With all these numbers flying around in your head, you might be wondering if there’s any way to minimize the cost of your retirement. Now is the time for some good news: You might not need as much to retire as you think. Continuing Care Retirement Communities (CCRCs) are an affordable option for those who want to save money and still live comfortably. Take a look at a few of these advantages to living in a CCRC:
Save on Healthcare
As you get older, you might need more intensive long-term care—which can be expensive. However, a CCRC that offers a life care contract, residents can save on some of those expenses because their entrance fee and monthly fees actually prepay for the long-term care they need, which means the costs won’t jump unexpectedly solely because their care level increases.
Avoid Housing Expenses
Many senior adults don’t realize how unpredictable the cost of home ownership can be. Owning and maintaining a home can be costly—and it can take a lot out of your retirement savings. However, a retirement community often only requires a fixed monthly fee, which will cover most of your expenses and leave your nest egg intact.
Save on Taxes
While we can’t speak for all communities, an Acts Retirement-Life Community allows you to take a one-time tax deduction on your entrance fee—and your monthly fees might also qualify for annual deductions. These amounts add up to substantial savings for you, allowing you to retire with financial peace of mind.
How much do you need for an affordable retirement?
Are you overwhelmed by how much you might need to retire? We understand—and we want to help you walk through these big decisions. Take a look at more advice on saving money after retirement.