Estimate Your Retirement Income Needs
It's likely that you'll need at least 70 to 80 percent of your pre-retirement income to maintain your standard of living during retirement. Here's a suggested formula for calculating the amount of income you'll need:
[average annual income over the 10-year period prior to retirement] x .70 = bottom of range
[average annual income over the 10-year period prior to retirement] x .80 = top of range
A couple earning an average of $60,000 per year, for example, would have to earn between $42,000 ($60,000 x .70) and $48,000 ($60,000 x .80) per year during their retirement to sustain their current lifestyle.
Obviously, your specific situation dictates the amount of money you'll require. Typically, retirement age triggers a number of changes in your spending patterns. For example:
- You may have paid off your mortgage.
- Your children may have finished college and moved away.
- Health care costs may use up a greater portion of your income.
- You may have to pay more to make sure your insurance needs have been met.
- Spending on leisure activities, such as travel, entertainment or hobbies, may increase significantly.
Check to see if you are on track...