Are you trying to figure out how much money you need to save for retirement? This can be a tough question to answer, but it's important! In this episode, I share the best way to figure out how much money you need to save and some tips on making it happen. Enjoy!
Every Tuesday, Tiffany answers one of your submitted questions. To submit a question for an upcoming episode, visit here: https://www.moneytalkwitht.com/asktiffany
[00:00:00] Intro/Outro: You know what it is. That's right. It's time to talk money with your money nerd and financial coach. Now tighten those purse strings and open those ears. It's the Money Talk with Tiff podcast.
[00:00:15] Tiffany Grant: Hey, hey, hey. Welcome to another episode of Tiffany's Take where I answer your money questions. Uh, if you. Question answered on the podcast, go to www.moneytalkwitht.com/tiffany and I'll be happy to answer for you. So the question today is, how much should I save each month for retirement? Now this question is very popular cuz people are like, how do I know
[00:00:39] Like, what do I need to think about when it comes to how much to save? What is the. Way to save how much, you know, all these different questions come up because it's so far away for most of my listeners that you're like, it's $20, enough is $30 enough , you know, what am I supposed to be doing right now? Uh, so that way I can set myself up.
[00:00:59] So instead of answering that question directly, because it depends on a lot of different factors, I'm just gonna give you some things. Think about when you're trying to calculate how much that should be. So the first thing to think about is what age do you plan to retire? Do you plan to retire at 65, 75, uh, 32?
[00:01:19] Who knows? You know, you wanna see what your, uh, trajectory looks like. How long do you have to make this money last? And when you're thinking about what. To retire. Keep in mind that once you retire, your income is going to stop. So you need to make sure that it's an amount that can get you through to the time you die once you start investing in savings.
[00:01:43] So take that into consideration when you're thinking about what age you plan to retire. If you plan to retire at 65, and let's say the average life in expectancy is like 90. , you have to make sure that your money lasts between 65 and 90, um, as far as your retirement planning. So of course, the later you wait to retire, um, the less amount of money you may need.
[00:02:07] But also you wanna think about, well, if you wait too long, will you be able to enjoy it? So that's something completely up to you, but something you need to think about next. You wanna look at how much. You will need each year to maintain your desired lifestyle in retirement. So what is your lifestyle gonna look like in retirement?
[00:02:26] You know, are you gonna be one of the people that wants to go, go, go, go, go. So you traveling everywhere, going places that you haven't been before? Or are you the type of person where you're gonna be like, well, retirement's here, now it's time for me to chill. Like I don't wanna be on the go anymore. Um, and so maybe your lifestyle's not as expensive.
[00:02:45] You have to figure that out for yourself. But it's just something that you should think about when looking at retirement planning. How much income are you going to need each year to maintain that desired lifestyle? So think about what you want that lifestyle to look like. Is it gonna look like how you live now?
[00:03:01] Is it gonna look more extravagant? Is it gonna look less? You know, , just kind of think about that. Number three, what are your expected sources of retirement income? You know, do you have pensions available? I know in this day and age, you know, that's, uh, rarity if you do have a pension. So if you had a job with a pension, you might wanna keep it.
[00:03:20] Um, Do you have pensions? Do you have annuities? Um, have you considered social Security? And to find out how much Social security benefits you'll be eligible for when you retire. You can go to ssa.gov and you can create an account and log in and they can actually tell you approximately how much you would get in retirement.
[00:03:44] And you can, they have sliders for, you know, what age you plan to retire and. That, and it's based on your previous income that you've earned over the years. So that's another thing to think about too. What are your expected sources of income? So that way you know what's guaranteed or what's, you know, quote unquote guaranteed.
[00:04:04] I'm doing air quotes, and then how much you need to do on your own. Then he needs to think about number four, how much risk can you tolerate with your investments? So if you have a long planning horizon, then you can probably tolerate quite a bit of risk because the, the market's gonna go up and down. Uh, that's just how it does over the time.
[00:04:25] But the longer you have in the market, the, um, less of a. impact it makes on your investments. So you wanna look at how much risk you can tolerate. If you have a short timeframe, like you're almost at the age you wanna retire, then of course you can't tolerate as much risk as someone that's younger or has a longer time.
[00:04:48] So just keep that in mind. . Um, number five, do you plan to keep working at part-time after retiring? So a lot of people, even though they can afford to retire, they're like, I really don't wanna stop working. So they pick up part-time jobs. Um, and there's nothing wrong with that. Matter of fact, I th I think that might be what I do because a body emotion stays in motion, right?
[00:05:12] Um, and so, um, that's another good example is my grandpa. He retired from the post office, but he's been working full-time and part-time job since he retired. , you know, so just think about do you plan to keep working part-time after retiring? Because if so, then you might not need as much money, um, saved because you'll still have income coming in.
[00:05:34] Another thing to think about is what kind of taxes might apply to your retirement saving. Do you have, um, you know, traditional 401ks and IRAs where they'll be taxed heavily once you retire? Or do you have Roths where you've already been taxed on that money so you won't get taxed again? You know? So just think about what your makeup of retirement accounts is and what kind of taxes might apply to those retirement savings.
[00:06:00] Um, leading into. Make, will you use tax deferral strategies such as 401ks, a Roth IRAs for retirement planning? So that kind of goes into number six, but also taking it a step further, are you going to do, for instance, backdoor Roths where you had your money all in a 401k? Now you wanna go into a Roth and now you need to go ahead and take that hit while you're working in order to, um, Roll the money in a Roth so you won't be, uh, won't have to do like your require minimum distributions and stuff like that.
[00:06:35] So I know I'm talking a lot and it's a lot of stuff that's probably going over your head because it's a, it's very complicated sometimes, but just think about are there text deferrals strategies that you'll be using leading up to retirement in factor that into your retirement planning as well, and how much to save.
[00:06:53] Then also, Last but not least, you wanna make sure you take into consideration any other expenses such as healthcare costs. Um, so when you're budgeting for retirement, do keep in mind that you will have, so the only healthcare. Coverage that you might have is, um, uh, Medicare. Right now, Medicare is good, but it's not the, it's not great, like it's not gonna cover everything.
[00:07:22] So you wanna make sure that you take into consideration what type of healthcare co costs you may need. As we get older, our health is going to. , that's a fact. Like I've never seen. Well, uh, I've seen people get healthier as they get older, but eventually their health is gonna decline too. It's just a matter of life, right?
[00:07:45] And so, as you might imagine, your healthcare costs are gonna be more expensive as you age, so you wanna make sure you take that into consideration. Also take into consideration long-term care costs. So you know, when you get older, when you retire, are you going to need to go to a retirement facility or are you going to need, um, long-term care?
[00:08:09] Like, who knows? So you wanna make sure that you take those expenses into consideration as well. And I will tell you long-term care. . Very, very expensive. Even if you, in the crappiest of nursing homes, it's expensive . So you wanna make sure that you take that into consideration too when you're thinking about how much to save for retirement now.
[00:08:32] So hopefully those questions kind of get you thinking on, you know, what you need to think. As far as your retirement planning, and then you can kind of narrow down how much you should be saving now in order to make those goals a reality. Now, if you need help to calculate this type of stuff, um, you can always reach out to me.
[00:08:55] Um, I'll be more than happy to give you an estimate, but also, um, reach out to a financial advisor. If you aren't the person to DIY your investments, then reach out to a financial advisor that can kind. Um, you know, model these things out for you and tell you how much you need to be saving and what that looks like, so you have options.
[00:09:17] But these are things that financial advisors, financial counselors, and you should be taken into consideration when thinking about how much to save. each month in re for retirement now. So hopefully that answered your question and I look forward to seeing you all on another episode of Tiffany's Take.
[00:09:37] You can get your question email@example.com talk with t.com/tiffany, and I'll be, I mean, ask Tiffany, I'm sorry, www. Money talk with t.com/ask Tiffany, and I'll be more than happy to answer for you. So I hope you all have a wonderful rest of your week and I'll see you next week. Bye.
[00:10:00] Intro/Outro: Thank you for listening, joining and being a part of the Money Talk with Tiff podcast this week.
[00:10:05] You can check Tiff out every Thursday for a New Money Talk podcast. But if you just can't wait until next week, you can listen to previous podcast episodes at Money Talk with t.com or follow t. On all social media platforms at Money Talk with the team. Until next time. Spend wise, by spending less than you make a word to the money wise is always sufficient.
- When calculating how much to save for retirement, consider the age you plan to retire and ensure the money lasts until the end of life expectancy.
- Determine what your desired lifestyle in retirement will be and calculate how much income you need each year to maintain this lifestyle.
- Think about your expected sources of retirement income, such as pensions, annuities, social security benefits, etc.
- Consider how much risk you can tolerate with your investments depending on how close you are to retirement age.
- Ask yourself if you want to keep working part-time after retiring and if tax deferral strategies such as 401ks or Roth IRAs should be used for retirement planning.
- Factor in any other expenses, such as healthcare and long-term care costs.
Do you want to have a stress-free retirement? It can be overwhelming to think about how much money you need to save for retirement. But don't worry, there are ways to ensure you have enough. You can ensure your golden years are incredible with thoughtful retirement planning and determination. In this article, we'll explore various factors to help you calculate your retirement savings, determine your ideal retirement lifestyle, and discuss strategies to help you make the most of your hard-earned retirement money.
Start with Your Age and Retirement Goals
Your age, retirement goals, and life expectancy are the foundation of determining how much you should save for retirement. The sooner you save and start early enough, the more time your nest egg will have to grow. Start by considering the age you, ideally, want to retire at and how many years you expect your retirement to last. According to statistics, life expectancy is increasing, so planning for at least 20-30 years of retirement is wise.
If you want to retire early, remember that your money may have to last even longer, depending on your age. You will need to save more money to compensate for the lost income due to early retirement.
Dream Up Your Retirement Lifestyle
Now that you know when you want to retire and for how long, it's time to dream up your ideal retirement lifestyle. Will you be traveling the world or simply enjoying life closer to home? Consider your current lifestyle, the activities you enjoy, and any new hobbies you want to explore. The more luxurious your lifestyle, the more income you'll need to maintain it in retirement. This retirement research will help you determine how significant your retirement savings should be.
Some retirees decide that going on cruises allows them to travel without having as much save for retirement. Or, perhaps you'd rather explore the world through long-term home exchanges or RVing. You may even want to spend your retirement years starting a business or volunteering with a non-profit to give back. Consider all of the options and determine what's most important for achieving your retirement goals.
Determine Your Retirement Savings Goal
Once you know your retirement lifestyle and timeframe, it's time to crunch the numbers. Calculate how much income you'll need to cover your living expenses, such as housing, health care, and entertainment. From there, determine the size of your retirement portfolio and how much you should save each month. Remember to factor in any Social Security or pension income you may receive, as well as inflation and taxes.
There are a lot of online calculators to help you figure this out, or you can get with a financial advisor.
Assess Your Retirement Income Sources
As you prepare for retirement, it's crucial to understand your expected sources of income. These may include social security benefits, pensions, annuities, and any other investments you might have. Knowing where your income will come from can help you hone in on how much more you need to save for a comfortable retirement.
The Social Security Administration offers an online calculator that can help you estimate your benefit amount. It's important to remember that the actual amount may differ from the estimation. You can also use the Retirement Estimator to better understand how much you could receive in monthly benefits.
If you think you may have an old pension or savings account you've forgotten, there are a few steps to take. First, check with your former employer or the company that managed your pension plan. You can also check with the Department of Labor's Pension Benefit Guaranty Corporation, which contains many pensions. The National Association of Unclaimed Property Administrators also keeps records of unclaimed pensions and other assets.
If you want additional savings to supplement your retirement income, consider working part-time. This can be a great way to keep busy and make some extra money. Consider your skillset and your passion when determining what type of work to pursue. Additionally, ensure that any additional income won't affect your Social Security or other benefits.
Evaluate Your Risk Tolerance and Retirement Accounts
When considering saving and investing for retirement, assess your risk tolerance level. Investing involves risk. Generally, the closer you are to retirement, the more conservative your investments should be. As you get closer to your savings goals, you may want to shift some assets away from higher-risk options to safeguard your savings. Also, consider tax-deferral strategies such as 401(k)s, Roth IRAs, or traditional IRAs to make the most of your hard-earned money.
A diversified portfolio can help maximize your savings and investment returns and protect against potential risks. A mix of accounts such as 401(k)s, Roth IRAs, and traditional IRAs can provide different tax advantages and help you reach your retirement goals. Additionally, having the option to withdraw from various accounts during retirement can give you greater flexibility and control.
Don't Forget About Healthcare and Other Expenses
While it's fun to dream about how you'll have enough money to spend your retirement years on leisure activities, it's essential to remember the not-so-fun aspects like healthcare and long-term care costs. These expenses can quickly affect your savings, so account for them in your planning.
Long-term care insurance is available and helps cover the costs associated with extended medical and nursing care. Be sure to shop around and compare policies to find the best fit for you. Generally, you should consider purchasing a policy if you're in your 50s or older and have enough assets to keep up with premiums, but your current income is not enough to cover out-of-pocket long-term care costs.
Planning for retirement might seem overwhelming, but with the right approach, you can ensure your golden years are everything you've ever dreamed of. By considering your age, retirement goals, desired lifestyle, sources of income, risk tolerance, and other expenses, you can begin to calculate how much you should save for your ideal retirement. And don't be afraid to revisit your plan periodically to ensure you're on track to achieve your goals. With proper planning, you can enjoy a successful and secure retirement.