How Much Retirement Savings Is Enough?
THE WOODLANDS, TX -- So many have wondered the same thing when thinking about their finances: How much savings is enough for a steady and financially stress-free retirement? Experts have discussed many rules of thumb to determine the numerical value: an estimated $1 million, 80-90% of your highest annual income, 12 times your highest salary. But the method you choose is dependent on the factors you value and apply to you. So how do you know you are on the right track for you? The best way to determine a retirement path for you is to consider several factors: the age you wish to retire, annual expenses, possible sources of income post-retirement, and more. Listed below are several factors to contemplate for retirement savings.
The age you retire is a primary factor in determining your savings estimate; the sooner you retire, the more you need to set aside to live comfortably. The average retirement age is 65, but your ideal age of retirement should be used as a reference for estimations. According to the Social Security Agency, the average retirement age for those born 1960 or later is 67 years, while those before 1960 average around 65 and a half years. Whatever your age may be, you should start contributing to your savings for retirement as soon as you can and as much as you can.
Since everyone’s lifestyle is different, and retirement plans may not be the same as your current lifestyle, having an estimated dollar amount of expenses is beneficial. Expenses such as housing, food, health, clothing, and transportation are a good start of estimation. However, some costs, such as health care, may increase over time. So, you have to be prepared to overestimate some categories to create a more realistic picture for your retirement. Looking at your family’s medical history can also give insight into future medical expenses you may have to address, making you more prepared. Hobbies you enjoy carrying expenses, for example golf, should also be included in the estimate if you plan to participate post-retirement.
The amount of money needed for comfortable retirement also depends on if you have additional income sources to rely on. The Social Security Administration provided a visual in 2017 to show the income sources of households aged 65 or older. The chart also includes Traditional and Roth IRAs, 401(k)s, 403(b)s, pension plan payouts, and annuities. Most Americans can rely on Social Security as the foundation of their retirement savings, but don’t forget to include potential retirement sources such as your workplace or inheritance.
The financial decisions you make now impact when you can retire, and the quality of your retirement lifestyle. At HFG Wealth Management, we want to help ensure you can maintain a comfortable retirement no matter how long. HFG Wealth Management has over 35 years of experience to plan around your individual needs, wants, and wishes, creating a strategy to maximize your retirement goals and income while ensuring the income lasts. For more information regarding retirement planning, fill out our contact form and we will be happy to answer any questions you may have.