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How much money you need to retire depends on many factors, according to CNN Money, part of the Cable News Network. Some of these factors are hard to predict, such as guessing how long you’ll live. Others are easier, such as how much money you have already saved.
How much do I need to retire?
Planning for retirement can involve many things that you might not expect. It’s not just about how much money you have now; it’s about when you decide to begin collecting Social Security benefits, how long you expect to live, your lifestyle, and many other things, according to the Consumer Financial Protection Bureau and CNN Money.
A very general estimate of how much you need to retire is 85% of your current income – every year, according to CNN Money. For example, if you earn $60,000 per year now, you’d need $51,000 per year to live on. This calculation is based on many assumptions, such as:
- You’re still working
- Your salary and inflation, together, will grow by 3.8% per year
- Your current savings will grow by about 6% per year
The calculation tool and guidance from CNN Money uses several other assumptions as well.
How much do I need to retire? Some questions to help you plan
The Consumer Financial Protection Bureau uses these questions to help you figure out how much money you need to retire.
Do you plan to continue working in your 60s? The longer you work (up until age 70), the higher your Social Security benefits might be.
How long do you expect to live? Of course, this can be a very difficult question. According to the CFPB, if you’re:
- A 65-year old woman, you have an average life expectancy of 87 years total.
- A 65-year old man, you have an average life expectancy of 84 years total.
So, when you’re figuring out how much money you need to retire, you’ll want to multiply the annual amount you need by the number of years you believe you’ll live. Then there are other things to consider, such as inflation. We’ll tell you about some online tools you can use that consider inflation and other factors.
What expenses do you expect to have after you retire? For example, will you still be paying off a mortgage? Do you hope to travel or move to a high-end retirement community?
Are you married? You might be able to boost your spouse’s financial security by continuing to work until your “full benefit age.” That age can vary depending on your situation, so you might want to check with your employer or with Social Security to understand what your full benefit age is. If you’re widowed, you might be entitled to a survivor’s benefit.
CNN Money offers this tool on its website.
How much do you need to retire: an interesting fact
Did you know that your Social Security earnings are based not on all your earnings throughout life, but the 35 years when you made the most money? That’s according to the Consumer Financial Protection Bureau, and it may be comforting news to some people whose income has varied over the years.
Please note: This article is only for general information and is not tax or legal advice. Consult your tax or legal advisor for guidance.
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