Do You Have Enough Saved for Retirement?

As you near retirement, you’re probably also starting to wonder if you’ve saved enough money.

This is by no means an easy question to answer. There are many individual factors that determine the right amount for you to save for retirement. To better understand how much money you might need and if you’ve indeed saved enough, there are three main factors to consider: your intended retirement lifestyle, your expected retirement income, and your retirement age. 

Your Intended Retirement Lifestyle

When it comes to the lifestyle you plan to live in retirement, you need to carefully consider how much you will be spending in retirement compared to what you spend while working. A general rule is that you will need 70 to 85% of your pre-retirement income to live comfortably. However, this isn’t a hard and fast rule. Consider these common lifestyle factors so you can understand how much of your pre-retirement income you will need to replace once you quit working:  

• Mortgage: Some people may have paid off their mortgage by the time they retire, reducing their overall cost of living. Since mortgages are a significant expense, this could mean you only need to replace 60 to 65% of your pre-retirement income. 
• Travel: Do you plan to travel frequently? If so, your cost of living may go up. Frequent travel in retirement means you should aim to replace 85 to 100% of your pre-retirement income or more.  
• Relocation or Downsizing: If you’re going to move, what difference will this make in your cost of living? Some people may move to be closer to friends or family. Others may move to a state with a lower cost of living. 
• Healthcare: How will you pay for healthcare? For many, healthcare is a significant expense during retirement. 
• Life Insurance: It’s a good idea to carefully plan for the end of your life, including how costs will be covered. Factor in the price of a premium for a whole life insurance policy to keep your family financially secure.  

Figuring out how much money you think you’ll need to live on each year is the first step to understanding if you’ve saved enough for retirement. Next, we’ll look at your retirement income.

Your Retirement Income 

Once you understand how your intended retirement lifestyle will affect your cost of living, it’s time to take a careful look at your expected income during retirement. Consider the following common streams of income during retirement: 

• Social Security: The Social Security Administration website has a calculator to help you estimate your benefits. 
• Pensions: Do you have a pension? The median pension amount is around $10,000 per year but may be as high as $30,000 per year or more. 
• Work: Do you plan to work during retirement? Even part-time work will help supplement your retirement income. 
• Savings: In addition to your retirement or investment accounts, do you have any other savings accounts? 
• Nest Egg (Retirement/Investment Accounts): To understand if you’ve got enough saved in your nest egg for retirement, you need to do a few calculations:  
  • First, write down what your expenses will be each year.
    • Example: I expect to need $50,000 each year in retirement.
  • Second, add up all your income.
    • Example: I will get $20,000 from Social Security and $10,000 from my pension = $30,000.
  • Now subtract your income from how much money you need in a year. This amount is how much you need to be able to withdraw from your nest egg each year to live comfortably. 
    • Example: $50,000 – $30,000 = $20,000 
  • Last, divide the amount you need from your nest egg each year by 4% (0.04). This number is how large your nest egg needs to be. 
    • Example: $20,000 /0.04 = $500,000
  • Four percent is considered the amount that is safe to withdraw from your nest egg each year to make sure you don’t run out of money before the end of your life.

Now you probably have a good idea of how much you need to save before you can retire. Let’s look at one more crucial factor – the age at which you hope to retire. 

Your Retirement Age

If you are like most people, you’ve been dreaming about the day you can retire for as long as you’ve been working. Since Social Security benefits make up nearly 40% of retirement income, let’s see how different retirement ages affect your benefits:

• Younger than 62: You cannot draw Social Security before age 62. 
• Age 62: You will receive about 70% of your benefits. This is the earliest age you can draw Social Security benefits. However, 62 years old is not considered Full Retirement Age (FRA) according to the Social Security Administration, so you will not be entitled to your full benefits. 
• Ages 66 – 67: You are eligible for 100% of your benefits. Most people will reach FRA between ages 66 and 67. Once you’ve reached FRA, you are entitled to 100% of your Social Security benefits.  
• Ages 68 – 70: You will receive more than 100% of your benefits. Retiring after your FRA will increase the amount of your Social Security benefits by about 8% each year until age 70.  

For example, if your Social Security benefits were $1,000 per month and you retired at age 62, you would only be entitled to about $700 per month. If you waited until age 70, you would get $1,240. That’s a difference of over $500 per month. 

How Americo Senior Life Can Help Secure Your Future

We understand that thinking about retirement can be daunting. You can safeguard your family’s financial future today by planning for your final expenses with a whole life insurance policy from Americo Senior Life. Whole life insurance from Americo Senior Life will help relieve your family of the burden of your final expenses. 

Our life insurance policies are designed specifically for seniors. Most people won’t be required to take a medical exam and as long as you pay your premium, you won’t lose your coverage. Apply online today for a life insurance policy quote and get pre-approved in minutes.