Do I have enough to Retire?
Saving for retirement is something every working individual should strive for. There will come a time in your life when waking up for work each morning, putting in eight hours a day, 40 hours every week, will become more than anyone wants to deal with. It seems like an easy task, right? Set aside some of your income and enjoy a nice, relaxing retirement. The question many face though as they begin investing or approaching their retirement date is, "do I have enough savings?"
For most individuals, it is difficult to know what a safe amount is to set for a retirement target. How can you truly know how much you will need? Well, there's no ideal figure that works for everyone, but there are ways to get to the right point for your own retirement. You can start by asking the right questions.
Is Your Current Income Enough?
The first question you should ask yourself is whether or not your current income will provide enough in savings to meet anticipated needs during your retirement. Forbes cites a handy trick that guides you to add up your current/project retirement savings and apply the 4% rule. That rule is simply that you can withdraw 4% to 4.5% of your retirement annually without outliving your money.
Outliving your retirement money is a significant worry as more Americans are living longer into retirement. In order to compensate, beyond following the 4% rule, you will need to determine whether or not you can or want to maintain your current lifestyle while in retirement. You can boost your own efforts by living below your current means, allowing you to save more money before retirement.
How Many Years Should Your Investments Last?
As of 2012, the USA Today found that Americans were living an average of 78.8 years; that's a new record high for longevity in the United States. The Motley Fool cites studies that show the typical American retires at 62, but workers already aged 50 or over are postponing retirement to a median age of 67.
So, Americans are living longer in retirement and starting it later in life; you can compensate for one courtesy of the other. Which is to say, you can continue to save for your retirement by working later into your career. Thus increase your chances of outliving your retirement funds, rather than the other way around. Additionally, it presents the opportunity to decide whether you are comfortable using up all of your investments by death, or if you would prefer to provide for others through a will.
Are You Willing to Scale Back?
Future investments are never guaranteed to provide generous returns, and in some cases those investments could even fall short of your expectations. Therefore, you must decide if you are comfortable scaling back your retirement lifestyle, or perhaps take on part-time work if necessary. Also, think about how anxious you may become if you encounter a situation where your retirement income fluctuates from year to year based upon returns.
Financial advisors can help you navigate this sea of questions, and by asking these questions of yourself you can provide a financial advisor with the information necessary to help craft a positive strategy for your investments. For more information, please contact Hughes Warren Inc.