What’s Your Retirement Number?

Whether it’s more time on the green or setting sail, it’s never too early to start thinking about your retirement goals. But before you start researching your next international adventure, it’s good to start taking a look at your present earnings, spending, savings, and what sort of retirement lifestyle you plan on having so you can have a better understanding of what it’ll take to accomplish those goals. 

It all comes down to determining where your income will come from. With Social Security being the major source of income for most of the elderly, it’s important to take into consideration the eligibility requirements for the maximum benefits. The earliest you can start receiving your Social Security retirement benefits is at age 62, however, if you opt to get your benefits early, you won’t receive the full benefits that you get when you reach your full retirement age. The decision to receive your benefits at 62 means you could see a reduction in the range of 25-30 percent based on the number of months you have retired before full retirement age. Your full retirement age depends on the year that you were born, use the Social Security Administration’s full retirement age chart to find out your full retirement age.

Most financial experts recommend saving no less than 80% of your annual pre-tax income. Depending on how you see yourself living, which might include trips and new hobbies, some retirees may want to consider aiming for an even higher percentage.

After taking into consideration your Social Security benefits, you’ll want to assess any savings and investments you currently have and any employer-based retirement savings accounts like a 401(k). With Americans living around 15-20 years past retirement age, it’s smart to consider supplementing your income through other options. Similar to Social Security benefits, 401(k)s also come with age regulations so it’s important to remember that withdrawing from your 401(k) before the age of 59 1/2 will come with penalty fees, reducing your overall payout. 

If you don’t have access to a 401(k), you might want to consider an Individual Retirement Account (IRA). This type of retirement account allows your money to grow on a tax-deferred basis while allowing you to make tax-deductible contributions (if eligible). 

If you’d like to gauge how much you should be saving in order to enjoy the lifestyle you’d like at retirement, try the Hughes MoneyCoach Retirement Calculator.  

Just as your present, your future will come with costs. You’ll want to estimate for rent or mortgage, food, utilities, insurance, and taxes. These items are necessary expenses, but it’s also important to factor in other categories of spending such as entertainment and emergencies. One of the biggest costs for retirees is health care. According to a study by Vanguard Research and Mercer Health and Benefits, an average 65-year old woman could see $3,300 to 7,700 in medical expenses annually. 

If you find that your retirement costs and spending will surpass your income, then it might be time to make some adjustments by either increasing your income or decreasing your spending. 

Need help figuring out a retirement plan that will ensure your golden years are golden? Talk to a certified financial planner to get a professional’s perspective with solutions designed just for you.