When thinking about retirement, the natural question you want to ask is, “How much money do you need to retire?”
This is a very personal question that evades a one-size-fits all answer. The average individual puts away approximately 5-6% of their income into their 401(k). Many financial institutions advocate putting away 10% of your annual income to prepare for retirement.
However, there are a truck-load of variables to take into account, because you and the person living in the house next door are completely different people; you and your spouse are different people; and yes, even you in your 40s, you in your 50s, and you in your retirement years are likely to be considerably different people.
Arriving at the right number is always a guessing game. The best advice is to be conservative with your savings and make sure you leave plenty of wiggle room for unexpected expenses. That way, if a surprise bill comes along, you’ll be in a better position to handle it. Figure out how much you think you’ll need to put away each month, and then put away just a tad more.
When you’re planning for retirement, also think about where your cash will be coming from during retirement and what you’ll be using it for. Will you have money coming from investments, social security, pension income, or portfolio withdrawal? Consider this to figure out a loose budget of how much you’ll want to spend a month so you’ll know how much you need to save going into retirement to get you started. Then once you’re there, if necessary, you’ll know what you can take from that income to use for yourself and what you need to put away to use for fixed expenses or your “in case of emergency” fund.
You’ll also want to consider life expectancy. How long do you think you’ll live? Of course, nobody really knows how long they’ll live, but you can look back at family history to estimate what it might be. Then, based on that, you can figure out approximately how much you’ll need each year if you’re to live. Your overall health can also help you determine how long you could possibly live into retirement.
Knowing ahead of time what you want out of retirement is key in being financially prepared, and following these steps can help you get there. Save more than you think you’ll need and make sure you know where your money will come from and where it will go to. There’s really no single number that can be given to everyone. We all live different lifestyles, so we’ll all need different budgets. You’re the only one who can know for sure how much money you’ll need to live the lifestyle you’ll want in retirement.
You can read more on preparing for retirement here.
FOR MORE HELP REGARDING HOW MUCH TO PUT AWAY FOR RETIREMENT, CONTACT MIRAMONTES CAPITAL.
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Miramontes Capital is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Miramontes Capital and its representatives are properly licensed or exempt from licensure. This video is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Miramontes Capital unless a client service agreement is in place. Miramontes Capital is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Miramontes Capital and its representatives are properly licensed or exempt from licensure. This video is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Miramontes Capital unless a client service agreement is in place.