Before you can answer the question “how much do I need for retirement,” you need to do a thorough evaluation of your responsibilities and your priorities. Your responsibilities will dictate that you have enough money for your retirement to meet them, and your priorities will determine how much you need beyond that in order to be happy, healthy and secure. Saving money for retirement is a big deal in just about everyone’s financial planning.
One way to approach the question of money and retirement is to take stock of what you owe on a monthly basis. Do you have a mortgage? If so, when will it mature? Do you have private health insurance, or do you use Medicare? Do you have life insurance, or long-term care insurance? What other monthly bills do you need to stay on top of? If your monthly bills total, say, $3,000 per month, then you need to have enough capital saved in order to cover those bills once you reach retirement. Capital can mean many things, from stocks, bonds and CDs to real estate investments and 401(k)s and IRAs. The bottom line is, if you’re retired you’re no longer working, and if you’re no longer working you no longer have your revenue stream. The capital you set aside needs to generate enough money every month to pay your bills during retirement.
Beyond your monthly bills, there is also the very important question of your quality of life. Many people look forward to retirement because it means they can travel, or relax, or spend more time with their grandchildren. Those wonderful things cost money too, and if you’re looking forward to enjoying them during your retirement then you need to ask yourself how they’re going to be paid for. Pensions, 401(k)s, Roth IRAs, stocks, CDs and other investment vehicles are favorite ways to achieve financial security during retirement.
Everyone’s retirement needs will be different, of course. Many Americans like to retire to safe, secure foreign countries, such as Panama and Costa Rica, because life is much less expensive there, and the dollar goes a lot further. Others want to stay closer to home and family. To determine what your retirement needs will be, be sure to consult with a financial advisor. Planning for your retirement is one of the most important things to take under consideration.