According to data from the U.S. Census Bureau, the median retirement income for people over 65 was $75,819 in 2021. But there are some important caveats here.
First, it doesn’t include Social Security benefits. Second, it doesn’t account for inflation. And third, it doesn’t consider how much money you’ll need once you stop working.
Where Does Your Retirement Money Come From?
Social Security benefits alone aren’t enough to support most retirees. In fact, many rely on pensions, 401(k), IRAs, annuities, and other investment accounts to supplement their monthly income.
What Is A Good Monthly Retirement Income For A Couple
The amount you need as a pair depends on your circumstances.
There are three main factors to consider:
• Your current financial situation.
• What you want out of life once you stop working.
Researching ahead of time about what it takes to support your retirement can help you make intelligent decisions. For example, you’ll likely need enough money to cover basic expenses like housing, food, and transportation throughout retirement.
And depending on where you live, you might also need funds to pay for health care costs.
You can use online calculators to estimate how much you’ll need based on your age, marital status, the number of dependents, expected earnings, savings rates, and other factors.
But remember that these estimates don’t account for unexpected events such as losing a job, getting sick, or having a baby.
The average American household spends about $35,000 per year during retirement. It might seem like a lot if you plan to live off one person’s salary alone.
However, it is essential to remember that you’ll likely have two incomes coming into play here. You’ll need to budget for both of those salaries.
Planning Ahead
According to the U.S Department of Labor, just over half of American workers are prepared for retirement. Many people don’t know exactly what it takes to retire comfortably, especially those who haven’t thought about saving enough for retirement.
However, according to the National Institute on Retirement Security, most people can afford to retire comfortably without working for too long.
Generally, getting ready for retirement involves planning and saving up money many years in advance, such as when you’re young. To do this, you’ll likely need to set aside some money each month into a savings account.
This amount depends on your age, where you live, how long you plan to work, and how much you make.
Enlist The Help Of A Professional
You may also want to consider consulting a financial professional to determine whether you need to adjust your retirement plans based on your current situation.
A financial planner can help you determine how much you need to save and what types of investments will best suit your needs.
Use A Retirement Calculator
Another tool you can use to estimate your retirement expenses is a retirement calculator.
These calculators allow you to input information like your expected salary, Social Security benefits, investment returns, inflation rates, and other factors to calculate how much you might need to save.
They can also suggest allocating your assets to maximize your chances of reaching your goals.
There is no perfect method of determining how much money you’ll need once you retire.
Many factors could affect what you spend during retirement, including health care costs, inflation rates, investment returns, Social Security benefits, and even whether or not you live in a high-tax state.
That said, some people like to use a simple formula to determine how much they need to save each month to achieve their retirement goal.
So how do you figure out exactly how much you need to save each month? Here are some things to consider:
Determine Your Income Needs
First, you’ll need to calculate how much money you’ll make per month once you stop working. You can calculate your annual salary and divide it by 12 months.
This gives you your monthly income. But since your income will likely fluctuate throughout your life, you’ll probably want to factor in additional sources of income, such as social security payments, dividends, interest, and rental property income.
Add Up All Your Expenses
Next, you’ll want to add up all your expenses. These include mortgage payments, rent, utilities, groceries, transportation, insurance, child care, medical bills, and anything else that adds up to more than your monthly income.
Remember that you don’t necessarily have to cut back on every single expense; however, you’ll want to set aside enough money to cover those items.
Calculate How Much Money You Need To Save Each Month
Once you’ve figured out how much money you’ll be making each month, you’ll want to subtract your expenses from your income.
The difference between these two numbers represents how much money you should put away each month.
So if you expect to earn $5,000 per month after taxes but only have an estimated $4,000 in expenses, you’ll need to put away around $1000 each month.
Of course, this number isn’t always easy to come by. Many retirees rely on pensions, which often provide less-than-adequate amounts of money.
Others may receive Social Security checks, which are taxed at higher rates than regular income. Still, others may choose to invest their savings in stocks and bonds, which means they’ll have to deal with market fluctuations.
If you’re looking to retire early, you’ll also want to consider how much money you’ll withdraw from your savings each year. Some experts recommend withdrawing 4% to 6% of your nest egg each year, depending on when you plan to retire.
That’s because you’ll want to ensure that you have enough money saved up to last through retirement.
Conclusion
Retirement is one of the most significant milestones in our lives. It’s essential to be prepared financially to enjoy your golden years without worrying about having enough money to get through them.
As a current Mortgage Underwriter with 15 years of experience, I have seen my fair share of money-related issues. Whether that be high levels of debt, not enough credit, or simply a lack of funds - I’ve had clients who fit into these categories.
Here I will share tips, tricks, and experiences on how you can get yourself back in control of your finances.
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