What Is Your Retirement Number?

Have you figured out your retirement number, yet?  Until recently, I had never heard of the extremely helpful retirement planning book called "The Number: What Do You Need For The Rest of Your Life and What Will It Cost?"

This is one of the more fascinating retirement planning books I have read.  To make it even better, the author includes a touch of humor in the way he discusses this very serious topic.  It was even mentioned in a recent segment on "Good Morning America."

What I appreciate most about this book is that it gives you simple, easy-to-follow guidance in coming up with a reasonable estimate of the amount of money you need to save and the amount of income you should have in order to enjoy the type of retirement that will be comfortable for you.  This is not an average of what most people need; it is a way of estimating the very specific needs of you and your spouse.

What Numbers Do Retirees Need to Know?

Retirement Income:  Have you come up with an estimate of how much income you will have when you retire?  How much will you need?  This author estimates that most people will need about 85% of their final working income.  In other words, if your last year's salary was $75,000, then you will need about $64,000 a year to retire with a lifestyle that is similar to the one you enjoyed during your working years.  Of course, if you make dramatic changes, your actual expenses could be higher or lower than that.  How are you going to reach that $64,000?  Half of it or more could come from Social Security.  The rest will need to come from a pension, a retirement job or investment income.

Retirement Savings:  This book suggests that people should have put aside eight times their last year's income.  If you are earning that same $75,000, that means you should have saved $600,000.  Again, this may change from person to person depending on other sources of retirement income you may have and your planned lifestyle after retirement.  Some of this retirement savings may be what you have put aside in an IRA or 401(k).  Some of it could come from the equity in your home or other property if you sell it and move someplace less expensive.

Withdrawal Rate:  While there was a time that people estimated they could withdraw 7% a year from their savings, this is considered far too aggressive today.  Instead, most people should limit their withdrawals to about 3% to 5% if they want the money to last the rest of their lives.  It is best to withdraw less in the early years and more in the later years when you may not have the ability to work part-time or do other things to supplement your income.  If you have managed to accumulate the $600,000 mentioned above, at 3% this would come to about $18,000 in income a year.  At 5%, this would amount to about $30,000.  If your goal is to reach the $64,000 in retirement income that you would need to replace a $75,000 salary, and you and your spouse together have at least $34,000 in Social Security benefits, then this gives you "your number."

This book is not only informative, but humorous and will help many Baby Boomers, as well as younger adults, put more thought into how they are going to achieve their number ... and what they will do if that number seems impossible to achieve.  Don't worry.  This book will not leave you feeling as though there is no way for you to reach a "number" that will work for you.

If you would like to pick up a copy of this book, here's a quick link to help you find it on Amazon:

"The Number:  What Do You Need For The Rest of Your Life, and What Will It Cost?"

If you want to read about other approaches to retirement planning, use the tabs at the top of this page to find links to hundreds of articles about money issues, family relationships after retirement, health concerns, and where to retire, both in the United States and other countries.

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How Much Money Do I Need to Retire?

When Can You Retire?

In early 2011, on my way to work, I heard a disturbing news report.  Approximately 44% of Americans felt that they did not have enough money to be able to retire comfortably.  That number has only grown worse.  Millions of Baby Boomers are not prepared to retire.  In fact, since that report in 2011, the truth is that currently mover than half do not feel they have saved enough.

More recently, the CBS also reported that more people than ever before expect to work past the age of 65, primarily because they need the money.  Reality is beginning to set in for Baby Boomers.

The Retirement Situation for Baby Boomers

The November 2011 AARP Bulletin reported some alarming statistics.  While the exact numbers have changed a little since that time, they are roughly the same.

*  31% of people over the age of 50 have credit card balances

*  44% have mortgage payments on their home

*  In 50% of households of people over the age of 50, neither spouse is currently saving for retirement!

*  The average monthly Social Security benefit is $1,182 a month (that amount was closer to $1,200 a month by 2015, although that is still depressingly low).

*  In 2009, 22% of retirees relied on Social Security for at least 90% of their retirement income

*  In 2010, 56% of Social Security beneficiaries were women ... and they often receive lower benefits than the average man

These statistics paint a discouraging picture about the future financial situation of the aging Baby Boomers.  It may be time that more of us take a hard look at our investment income, and decide what we can do now to prepare for retirement.  Although many of us assume that we will just keep on working forever, the reality is that it isn't always possible.  Sometimes people get laid off in their 60's and find it difficult to find another job.  In other cases, our health declines and we simply are not physically capable of continuing to work.

What Are Your Plans for Assisted Living?

Finally, think about what will happen to you if you need to go into assisted living.  According to the Genworth 2011 Cost of Care Survey, the median annual cost of a one bedroom unit at an assisted living facility ranges from about $28,800 per person in Georgia to about $55,000 in Maine and Delaware.  It is an extraordinary $66,000 in Alaska.  Can you and your spouse afford to pay that?

There are options.  The time to purchase long-term care insurance is when you are young and relatively healthy.  Purchasing this insurance means you will have to save far less money to cover your future medical expenses.

How Much Will You Need to Retire?

The bottom line is that only you can figure out how much you will need to retire.  Start by looking at your benefit estimates from Social Security.  Compare that to your budget.  Look at the difference between the two amounts.

Are there areas in your budget that will disappear by the time you retire?  If possible, pay off all the bills you can.  Look at all the ways you can get your budget as low as possible by retirement.  Then compare the differences between the two amounts.

Let's assume you will still be short $800 a month or $9600 a year.  If you are going to follow the 4% rule, which financial planners suggest as a way to make sure your money lasts the rest of your life, then you need to save 25 times the $9600 a month in order to have enough money to retire.  That means, in this case, you will need to save $240,000.  Obviously, the sooner you start, the easier it will be to save this amount of money.

If you don't think you can save this much, you need to figure out how you will cut your expenses or increase your retirement income ... perhaps by postponing your retirement.

Start planning early for a successful retirement.

If you are interested in reading more about retirement planning, where to retire, health issues, and more, use the tabs or pull down menu at the top of this page to find links to hundreds of additional articles.

http://www.baby-boomer-retirement.com.

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