What is Your Magic Number for Retirement

  • Post Author:

If you’re like most people, you plan to retire at some point, whether that’s 5 years from now or 40 years from now. Unfortunately, the average investor dreams of what they’ll do with their retirement funds, and not focus on how much money they’ll need to enjoy retirement. As with most things in life, achieving a big goal takes purpose and determination, and investing for retirement is no different. That is why it’s important to have a number in mind – a magic number for retirement. If you haven’t come up with your magic number yet, or are in the planning phases, here are a few things to consider.

How to Get Started Planning Your Retirement

Planning out how much money you will need in retirement is a bit like creating a household budget. You summarize your expected expenses in retirement and balance those with the expected income. It seems simple enough but there are other factors such as inflation, taxes, and healthcare that can muddy the water. Below are a few things to consider when planning your retirement savings goal.

What Do Your Savings/Investments Look Like?

One of the key things you will need to review is your current savings and investments balances. Plugging those values into an investment calculator along with the number of years to retire and anticipated contributions will give you a rough estimate of what you will have going into retirement. Although this step doesn’t necessarily help you calculate your savings goal, it’s going to be instrumental in showing you how close you are to meeting the goal, and the steps you’ll need to take to get/stay on track.

What are Your Expenses Going to Be?

Estimating your future expenses is a very important step because expenses are what draw down your retirement funds. Some of the largest expenses in retirement are going to be housing (if you don’t own your home outright), healthcare, transportation, and leisure activities. Most expenses can be easy to project, like housing, utilities, food, etc., but the wildcards are healthcare as well as future inflation and tax rates. It is a good idea to overestimate your monthly expenses in retirement, and when they come in lower, you can use the savings to do the things you will enjoy.

What Would You Like to Do In Retirement?

After working most of your adult life, you want to be able do the things that you enjoy in retirement. These leisure activities need to be factored into the expense equation, because the things that you do in retirement will impact how much money you will need to finance them. Dream big! It’s okay to have aspirational goals, like traveling or exciting experiences, but you need to factor that into your plan and have the funds to back them up!

So How Much Money Do I Need to Retire?

Unfortunately, as you can see above, there are a lot of factors that go into figuring out how much money you will need to retire. When you’re trying to determine your magic number for retirement, it’s incredibly important to work with a seasoned professional. At Safe Harbor Retirement Group, our team can help you create a plan that can fund the retirement that you want. Call (614)-760-0670 to book a complimentary meeting with one of our advisors today!