For Mark Roberts’ Use:
It’s common knowledge that saving for retirement is extremely important, but figuring out how much money to save can be a daunting task. The actual amount needed for a comfortable retirement will vary from one person to another, depending upon several different factors. It’s also important to consider the lifestyle and goals you have in mind for your golden years. Therefore, it’s not possible to come up with one magic number to answer this question for everyone. When determining the amount you need to save for retirement, consider the following factors.
At what age do you expect to retire? It’s common to overestimate this number, because many people end up retiring several years before they had expected. While it’s not always possible to predict this time of your life precisely, do plan for the possibility that you might be forced to retire a few years early. The earlier you retire, the more money you will need in the bank.
How long do you expect to live after retirement? This is another factor that can be unpredictable, but looking at your family history as well as your own health should give you an idea. Keep in mind that the average lifespan is increasing. If your grandparents lived to see 100 and your parents seem well on their way, you may need to plan for quite a long retirement.
Consider your health care needs. Long-term care in a nursing home is often very expensive, and health care costs are rising overall. Does your employer offer health care benefits to retired employees? These are important factors to consider.
Also consider your desired lifestyle. Do you hope to travel? Do you have hobbies like golf or sailing that require expensive club memberships? You’ve worked hard all your life so that you can enjoy your retirement years, so be sure to plan accordingly.
When making your calculations, keep in mind the effect inflation will have upon your future living expenses. Also remember that Social Security is under significant strain, and that you probably can’t count on it to provide for all of your needs. A common rule is to aim for an annual income of about 80 percent of your pre-retirement salary. However, after considering the above factors, you may arrive at a figure significantly lower or higher depending upon your specific needs.