Determining retirement income is difficult, but considering monthly costs, life expectancy, and potential secondary income can help. Social security and pensions may not be reliable, so it’s important to save more than necessary and plan for a stable income through investments. Working during retirement is also becoming more common. Saving around 15% of current income can be a simple fix.
Determining your retirement income can be a stressful exercise, especially when the economy is in trouble and many investments look questionable. The question of how much retirement income you need to survive is a difficult one, and ultimately something only you can decide, but a few simple ground rules can help you arrive at some general numbers. Once you know how much money you need to earn each month, you can calculate how much money you need to set aside to have a steady income to survive. With the market uncertain, it’s a good idea to put down a little more money than necessary, to ensure you never find yourself in a situation where money runs out late in life.
First, it’s important to recognize that while Social Security and company pensions may have supported people once they retired, those days are largely over. And unless things change substantially, they are unlikely to return. This means that you will need to expect to earn all of your necessary retirement income on your own, through your investments. If such social safety nets reappear, you’ll simply be in an even stronger position, and if they don’t, you’ll still be able to hold on.
One thing you’ll want to ask yourself is if you plan to retire entirely or if you plan to continue working for a bit. The whole concept of retirement is actually quite recent, originating in the Great Depression, when people were trying to push older and less productive citizens out of the workforce, to free up space for younger and largely unemployed workers. Today, it has again become quite common for people to work their entire lives, often voluntarily. Many people actually retire from their primary career, and then find a side income through a new career, often something they had wanted to pursue in their life, but never had. If you have this type of secondary retirement income, the amount of money you need to save for retirement may be much less.
To figure out how much retirement income you’ll need to survive, you’ll need to consider your monthly costs. If you own your own property, this will likely include insurance, medical expenses, travel, food, transportation, and repair costs. Later in life, you may also need to calculate the cost of some kind of support staff. If you don’t own your own home, you’ll also need to calculate rents and figure out how rents might increase over your lifetime.
You’ll also need to see how long your life expectancy is, and there are several actuarial charts and tables that can help you determine a probable age. It’s also a good idea to add a few buffer years at this age, so you don’t find yourself in your later years without reserve funds. Taking your estimated annual expenses and multiplying it by the number of years between retirement and your projected life expectancy will give you a ballpark figure for what your total retirement income will be.
From this you can calculate how much money you will need to earn each month, and from there you can determine how much money you will need to have invested in order to have a stable income. If you have the finances, it is better to be able to live minimally only on your interest, as this will ensure that you always have finances, no matter how long you live. And while figuring all this out can seem a bit daunting, as a simple fix, most teens find that if they can save around 15% of their current living income, they’ll likely have enough money saved by the time they’re ready. backing out.
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