Planning Your Financial Future: How to Calculate How Much You’ll Need to Retire
If you hope to stop working one day, it is important to start planning for your retirement right away. Contributing even a few dollars a week to start may be enough to improve your financial future and make it easier to enjoy your retirement on your terms. What are some ways to calculate how much you will need to retire?
How Much Do You Need to Live?
One way to determine how much you will need to retire is to first determine how much you need each month to live on. If you need $2,000 a month to live comfortably, you will need $24,000 a year. Assuming that you plan to live for 10 years after retiring, you would need to save $240,000.
Don’t Forget to Account for Medical Needs
When projecting how much money that you will need to retire, you should account for any medical costs that you may incur. Most people will purchase a long-term care insurance policy or an insurance policy that includes coverage for certain long-term care needs. As premiums may vary, it is worth shopping around before you need coverage to keep costs down.
What Will Your Tax Rate Be?
One issue that you need to consider when retiring is how taxes may erode your savings. When you take money out of an IRA through a bank, like General Electric Credit Union, or 401k, that money may be subject to income taxes. To reduce your tax rate, it may be a good idea to use a Roth account that allows you to withdraw funds tax-free as you age. Roth accounts may also be worthwhile because there is no minimum age at which you have to start making withdrawals.
What Are Your Goals After Retirement?
Not everyone is going to play golf or spend time at home with the grandchildren after they stop working. For some, retirement means starting a business, becoming a foster parent or volunteering. Therefore, it is important that you know how much it will cost to acquire that business or how much that you will need to contribute to the causes that you care most about.
You are never too old or too young to start planning for your retirement. If you are 50 or older, it may be a good idea to talk to a financial adviser who can give you insight into catch-up provisions that can help accelerate your savings. Younger people may also want to talk to an adviser about how to save money while still having enough to buy a home or start a family.
Author: Hannah Whittenly