By Frank Legan
Most financial experts recommend aiming to save enough to replace roughly 80% of your pre-retirement income to retire comfortably. While that may feel ambitious for some, it’s a helpful benchmark to guide your planning.
Retirement looks different for everyone. For some, it’s about spending time close to family and friends; for others, it’s traveling or pursuing lifelong passions. Because of these differences, it’s important to carefully estimate what it will take to work toward your own version of a comfortable and peaceful retirement.
Consider the following questions as you evaluate how much you may need to retire the way you want and make decisions that reflect your goals and priorities.
When Do You Want to Retire?
The first thing to consider when deciding how much money you need to save is your age, both now and in retirement. If you wish to retire early, you have fewer years to save for a longer retirement. Additionally, if you begin receiving Social Security payments prior to reaching full retirement age, you’ll have to account for a lower monthly payout.
The state of the stock market can also influence how much money is required and how long it lasts. Of course, you can’t actually predict the state of the stock market when you retire, but it’s still a wise idea to plan for the possibility of retiring in a bear market.
What Type of Lifestyle Do You Envision for Yourself?
Have you given any thought to the kind of retirement lifestyle you want to live? If you’re certain you want to travel, play golf, or spend time with your grandchildren, consider what that entails and the associated expenses.
For example, if you intend to travel, ask yourself the following questions:
- Do I want to travel abroad or domestically?
- How frequently would I like to travel?
- How would I prefer to travel? (e.g., car, airplane, or RV) Where would I like to stay? (e.g., a five-star hotel, an Airbnb, or with family members)
- Do I want my family to join me on the trip?
- Do I plan to cover their expenses too?
- Can I continue to live at my primary home? If so, who can watch my house and maintain it while I’m traveling?
Even if your dream is simply to spend time with your grandchildren, you should still think through the associated costs. To some, spending time with grandkids means babysitting a few times a week. For others, it means footing the bill for various trips for the entire family.
Either way, plan out the specifics of your vision so you can see how much money is needed to make that dream a reality.
What Is Your Current Debt Level?
Let’s talk about another retirement-income influencer: debt.
There are two significant drawbacks of taking on debt in retirement:
- It reduces your cash flow for non-essential items like housing, travel, and hobbies.
- It can deplete your retirement funds more quickly, meaning you might eventually run out of money or have to change your lifestyle.
If you carry debt, a smart move is to carefully examine your debt and determine how much cash flow you need in retirement to pay for anticipated expenses.
Before they retire, some people prefer to pay off any high-interest consumer debt. Some even go so far as to pay off their auto loans and mortgage.
How Do You Want to Leave a Legacy?
For many people, retirement planning isn’t just about enjoying life today, it’s also about what happens tomorrow. Whether your focus is supporting loved ones, contributing to causes you care about, or transferring a business, thoughtful planning can help direct your wealth where you want it to go.
Strategies may include updating your will, creating or revisiting trusts, reviewing beneficiary designations, or exploring charitable giving options. Considering these steps during retirement planning allows you to align your resources with your values and provide clarity for the next generation.
How Can You Prepare for Inflation and Market Shifts?
Even the best-laid retirement plans can be influenced by forces outside your control, like inflation or market downturns. Rising costs of living can gradually erode purchasing power, while volatility in the markets may affect the longevity of your savings.
Addressing these possibilities means thinking through flexible strategies, such as maintaining a mix of assets, considering investments that may help offset inflation, and stress-testing your plan against different economic scenarios. This kind of preparation can help you adapt over time while keeping your retirement goals in view.
Plan Today to Retire Comfortably Tomorrow
Planning for retirement can feel overwhelming, and there’s no single formula that guarantees you’ll retire comfortably. The key is to examine your unique financial situation, goals, and lifestyle to create a plan tailored specifically to you.
If you’re ready to take a closer look at your future and build a strategy, reach out to us at 440-683-9213 or flegan@seia.com or schedule a complimentary introductory call online!
