Youve worked hard all your life, and retirements the time to cash in, to fill your days with vacations, relaxation, grandkids, friends, and fun. But if you dont have enough money to fund the kind of retirement that youre envisioning, you could find yourself working just to make ends meet. Whether youre 25 or 65, taking the time to calculate and plan how much you will need for a comfortable retirement can ensure you make the most out of those golden years.
Calculate How Much Youll Need
According to the Department of Labor, youll probably need between 70 and 90 percent of your current yearly income each year of your retirement to maintain a comfortable lifestyle. If you have expensive medical bills, plan to travel, or have large debts, you might need more. A financial planner or retirement specialist can help you determine how much your particular situation requires. Once youve determined how much money you need for each year of retirement, subtract your Social Security benefits, and multiply by the number of years you expect to be retired. Of course, your grand total is just an estimate, so its better to save more in case the unforeseen happens.
Employer Sponsored Retirement Plans
Youll need to save quite a bit of money if you want to retire well, but the good news is youre probably not on your own. Many employers have special programs to help their employees save. A 401(k) is a retirement investment account that offers interest and tax benefits. Often, employers will match your contributions to your 401(k) up to a certain amount. Know that amount and make the maximum contribution to boost your savings. A pension is another form of an employer-sponsored retirement plan that consists of a regular payout after retirement. Find out if your employer offers these or other retirement plans, how you qualify, and how you can make the most out of them.
Individual Retirement Accounts
If your employer doesnt have a retirement savings plan, youre not out of luck. You can start an Individual Retirement Arrangement (IRA), which also has tax advantages. You can deduct some of your contributions to your IRA, and if you have a Roth IRA, you dont have to pay taxes on the money you withdraw during retirement. You can contribute up to $5,500 per year into your IRA until youre 50 and more as you age. To make it even easier to save, you can set up direct deposits into your IRA just as you would with an employer-sponsored 401(k).
The good news is that youll probably enjoy a longer retirement than your parents or grandparents did. Thanks to scientific and medical advancements, aging isnt what it once was. Its now possible for people to enjoy thirty years or move or active, agile retirement. The bad news is that the longer you live after retirement, the faster youll use your savings, leaving little or nothing for final expenses or inheritance for your loved ones. Life insurance can help you enjoy the money youve saved without worrying that your loved ones will be left with a financial burden once youre gone. By naming your loved ones as beneficiaries on your life insurance policy, you can ensure they will have the money to satisfy funeral costs, medical bills, and other unpaid debts. You can also use your life insurance policy to leave your loved ones a monetary gift once youre gone.
Whether retirement is just around the corner or youre just starting to think about retirement savings, its never too early or too late to prepare to enjoy your golden years. At SelectQuote, we want you to have a long, happy, and leisurely retirement. After all, youve earned it!