How Much Retirement Fund Do You Need

Planning ahead is not planning in vain. People will add years into their lives until they have reached a moment when they want to retire. But with inflation, longer life expectancy and doubts on the Social Security’s future, how will you know how much retirement fund you will need?

Every person needs to retire and sometimes are forced to retire due to unforeseen circumstances. The years of retirement need not be a life of boredom and dullness but one that is happy and prosperous. Picturing yourself in the latter situation depends on the steps that you are taking today. Since there are so many changing variables in the offices, investing now with the future in mind seems like a viable idea. In addition to that, steering the wheel of your finances in the future can lead to a more comfortable retirement.

Usually, the Social Security and the pension are used in the retirement ages but with people relying on double salaries, shifting work and managing their own retirement funds it is estimated that 60 to 80 percent of the income in your final years is needed to afford your lifestyle after retiring.

Depending on the Social Security alone is very risky since the benefits that can be achieved from them are becoming insignificant. Inflation also has a very huge role in retiring comfortably. On the average of 3 percent inflation, the cost of living will be twofold every 24 years. With these in mind, your annual income should increment every year to cope up with the prices of goods even in the years of your retirement. Another thing to keep in mind is the health insurance and medical costs that you will probably need during the golden years.

In general, the amount of your retirement funds should be as much as you can save. This fund will help you throughout your retirement years and building it is very easy as long as you make the right decisions and start early. To be able to do that you could begin with contributing a great deal to 401(k)s, IRAs and annuities. Investments like mutual funds, bonds and stocks can also supplement your retirement funds. Always remember that your retirement period may last for 30 or more years.

Individual circumstances also play an important role in building up your retirement funds. Retiring early such as during your 30’s or at the age of 50 or 55 can mean that you may require more retirement years to support. In comparison to those who would be retiring at the age of 60 or 65, bigger assets are needed if you retire early. But if you plan to work on a part-time basis during your retirement age, you may need smaller assets.

It is also important to predict your expenses during your retirement period to determine how much retirement funds you need. Almost all people who have reached their retirement period incur costs like food, insurance and utilities but some might have additional expenses. These expenses may come in the form of child’s tuition or mortgage payments.

The lifestyle that you want after retiring would also affect how much retirement fund you need. It is very important to consider how often you would like to eat out or travel during your retirement years. Once you have determined these expenses, try to save every year to support those expenses. Lastly, think about hiring a financial planner who will aid you to ascertain how much your retirement funds will be.

[image from J Masta]

Tags: retirement fund, retirement, planning