We are often asked, how much do I need to have saved up by the time I retire? This question really depends on how much your retirement is expected to cost. That depends on what your expenses are, at what age you retire, and how long you expect to live. Then we have to factor in the rising costs of living over time (inflation). The total cost usually surprises people. Here are some examples:
- A person retires this year at age 60 with annual expenses of $75,000. Assuming their expenses will go up by 3% per year, their total cost of retirement over 30 years would be over $3.5 million.
- A person retiring 15 years from now with $75,000 of expenses now would actually need almost $117k per year by the time they actually retire. Then to make that last for 30 years, the total cost of retirement would be over $8.6M.
That is a lot of money! Now that doesn’t mean a person needs to have that entire $8.6M all up front. Income sources like social security and pensions can help offset some of that, and investment returns can also help provide some of the funds needed to meet needs.
This is why retirement planning is important to ensure that you have a plan in place to achieve your retirement goals. Do you have an idea of what the cost of your retirement could be? Do you have a plan set to fund your retirement? If not, please feel free to contact us about our financial planning services to develop your retirement plan.
