Calculating your Post-retirement Income,
Do you know how much money is enough for retirement? We’ll show
you how to find out.
“Time waits for no man” – Ancient Proverb
That ancient quote is a great reminder how important it is to start planning for your retirement. Whether
we choose to acknowledge it or not, retirement is creeping up on us. Even for those who have just
started their career, retirement planning is essential to providing a secure future for themselves and their
loved ones. But that doesn’t mean we’re defenseless against time. In fact, with the proper planning, life
after work can be the most rewarding years of your life.
One of the most basic ways to begin planning for retirement is determining your
post-work income. Post-work income is the amount of money you’ll need to live
comfortably at current income levels, after you’ve retired. That means having
enough money to live comfortably without worrying about running out. It also
means making sure you have enough extra to do the things you’ve always
wanted to, like travel, or just plain relax!
Meeting with a financial professional and determining your post-work income is
fairly painless. But not many Americans have done it. According to the 2007
Retirement Confidence Survey (RCS), released annually by the Employee
Benefits Research Institute, 43 percent of workers say they have tried to
calculate how much they need to accumulate for retirement.
So here’s a quick rundown of determining what you’ll need to save for
retirement. Your post-retirement income heavily depends on the age you wish to
retire and how much money per-year you wish to spend. Generally, you want to
have between 75 percent and 95 percent of your pre-retirement income
available to you, per year. This way, you won’t be forced to deal with a drastic
drop-off in the way you live. Many people grow accustomed to living on a certain
income, and it’s important to stay consistent after retirement. People are living
longer too, so you’ll also want to take that into account, along with inflation. In
general, it’s been said that in order to preserve your retirement assets, you’ll
want to take out 6% or less of them per year.
Here’s a quick and easy example of how to determine what you’ll need to save
to be in the ballpark: Say you retire at age 65 and decide you’ll need 30 years
of dependable income, at an average of $55,000 a year (assuming you can live
comfortably on that amount). That means, you’ll need to save approximately
$1,650,000 to make sure you have enough to retire. And that’s without taking
inflation, medical costs, travel, and any other unexpected expenses into
Getting a rough idea of a number is a good way to light a fire under your
retirement plan. Often people believe they are saving enough, when the reality is, they’ll fall short of what
is needed. By determining a rough estimate, you can then work with a financial professional to nail down
an exact number. The sooner you get started saving, the easier it is on your future.
Of those 43 percent who have calculated, 64 percent has done so with the help of a financial
professional. While something can be said for “doing it yourself,” or if you choose, just guessing (we don’
t recommend that!) most post-retirement income estimates need to be tested for real-world accuracy by
For instance, you may come up with a number that seems sufficient, but with the help of an expert, your
number can be put through a series of scenarios to see if it holds up under certain real-world situations.
By running it through a series of tests, professionals can determine what possible risks and warning
signs may come up. Say, for instance, if you or a spouse were put in a long-term care facility at some
point during retirement, your advisor can look at your determined number and see if it will hold up under
By determining the exact amount of post-retirement income you’ll need, you’ve taken the first step
towards saving for your retirement. Once you get that out of the way, you’ve begun down the path of
securing your future. Asking for help can be crucial, because a professional can tell you if your number
will hold up in case of emergencies or other unexpected events. Meeting with a professional and
determining how much you need to save is the first step towards determining future goals for retirement.
It will wake you up to the real number you need to reach. Best of all, it’s painless, and you’ll be glad you
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