subject: Have You Saved Enough For Retirement? [print this page] You should be saving funds for your retirement each month. To determine how much to set-aside from your paycheck, calculate the total amount you will need for your later years. You can do so by estimating about 60 to 80% of your current income. This rough figure may not, however, take into account your true retirement expenses.
Yearly Spending
Before you can understand how much you need for retirement, you should know your non-retirement needs. Estimate how much you spend each month on bills, food, entertainment and other expenses. Use this monthly figure to determine your current yearly costs. You can also calculate your yearly expenses by reviewing your previous years taxed income.
Retirement Spending
In retirement your spending habits will be different. Your children will most likely be in homes of their own, which will reduce your monthly spending level. If you expect your mortgage to be paid, you can subtract this bill from your monthly retirement budget. Be sure to also take away the expense of retirement savings, since you will be in your retirement years and no longer need to save.
Next you must add in any new expenses that retirement may bring. Many people enjoy extra traveling in their early years of retirement. Make sure you consider this in your budget. You should also take into consideration the rising costs you will see for your medical care as you get older.
Your Retirement Budget
With your current estimated spending, subtract your non-retirement expenses and add new expenses that will arise. This gives you a basic idea of what you need for each year of retirement. To determine how many years to save for, consider how long you may live. The current U.S. life expectancy is just under 78 years. You may want to add an additional ten years to this if your health is quite good.
Once you know how much you need to save for retirement you can divide this by how many years you have until you retire. This will tell you how much to put aside each month in your 401K or IRA.
by: SextonLawAR
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