How much do you really need to retire?
Chad Waddoups, from Mountain America Credit Union's Wealth Management Team, says, "While there's not one answer for everyone, a simple principle that anyone can lean on is to forecast their retirement income."
This involves asking four key questions:
- What kind of hobbies will I want to enjoy in retirement?
- What are the associated costs?
- What about travel? How much will I need for that expense?
- Are there medical costs I should anticipate?
Chad says there are a few rules of thumb for finding your magic number—some people love the $1,000 rule (the idea that for every $1,000 of monthly income you want in retirement, you should have about $240,000 saved).
This kind of rule can be useful for general benchmarking purposes but may not accurately predict your personal retirement needs.
Many people worry that they didn't start early enough, but the most important thing is to get started now.
If you're having trouble with the longevity of your plan, break it down into smaller chunks with these questions:
- What does the next five years look like?
- Where do you want your retirement savings to be?
- What other financial goals will you be working on during that time frame?
- What about the next ten years?
It's common to think that any extra money should be put toward paying down debt instead of saving for a far-away retirement.
Online calculators can help you figure out the interest on your debt versus the returns you would get from investing the money.
When you see the numbers in black and white, it will be easier to decide if it's wiser to prioritize investments above paying off debt as quickly as possible.
Emotions can also play a role in this decision. For some people, even the hard numbers don't outweigh the stress of knowing you have debt nagging at you.
There may even be a middle ground, where you split the extra money toward both priorities. A qualified advisor can offer guidance on what's most appropriate for your situation.
Five years before retirement is a good recommendation on when to turn to professional help if you haven't done so yet.
If you're someone who needs more guidance and wants to be confident that you're making good financial decisions during your working and saving years, an advisor can help you to define your magic number and set goals on how to get there.
You can learn more at macu.com.
