Do you have savings for retirement tucked away? Many people want to put money aside to pay for their retirement, yet struggle to plan for it. There are numerous options available to help you accomplish your retirement plans. Before you get started on your retirement plans, it’s important to consider how much money you will need to cover your retirement years. You may be surprised to discover that the cost of retirement is more than you estimated.
How Much Will Retirement Cost You?
The cost of your retirement will range significantly based on various factors. Your costs are determined by the following:
- Your lifestyle and how you plan to live out your retirement.
- The number and type of expenses you
- Your overall expectations for
- Your spouse and their expected contributions. It is important to ensure both you and your spouse are covered with a life insurance policy in the event an unexpected death occurs. This will ensure the other spouse can financially support themselves and cover any unplanned for costs such as medical bills and final expenses.
Provided below is the best way to plan for your cost of retirement:
- Determine how much you will need to spend on a monthly or annual basis. Start with what you are spending now as a baseline. Then, remove costs that you will not have during retirement such as your
- Reduce how much you are spending by how much you are saving each month. Once you are retired, you will no longer need to save for it any longer.
- Know what your current tax rate is. When you retire, your tax rate and what you pay towards taxes such as Social Security taxes will drop.
- Consider the lifestyle you plan to live when you retire. If you plan to travel the world, you will need more money saved than if you were to stay close to home and live a modest lifestyle.
- Consider your health and long term care insurance needs will be when you retire. One of the biggest expenses during retirement is health care. For example, long-term care in an assisted living community can be very taxing financially.
Your next step is to continue growing your money as quickly as possible for your retirement. Consider the following options:
- Continue to build your savings for your retirement.
- Invest in an IRS-approved tax advantaged retirement plans. These plans allow you to put money into them now and let it grow. The funds are taxed less than if you were to save in a traditional savings account. Typical options include 401ks, IRAs, and Roth IRAs. Your employer may offer these plans as well.
- Consider the purchase of universal life insurance. Some products offer a cash value that allow you to borrow against or cash out a portion of the value over your lifetime. You can use these funds as a source of income during your retirement.
- Invest in additional financial investments such as investment accounts associated with stocks, bonds, and mutual funds.
The best retirement plans are those that take into consideration your loved ones. It is often best to work closely with your spouse to create an action plan that allows you to put as much money aside as possible during your working years. The sooner you get started on your retirement plan, the longer the money has time to grow and mature, enabling you to use it in retirement the way you see fit.