Know How Much Needed to Retire

If your wondering how much needed to retire you do not need the aid of a financial planner to estimate your target retirement savings. The rule of thumb is that you need to save at least 75% to 80% of your pre-retirement income for each year of your retirement in order to live a standard of living comparable to your present standard of living.

Basically if you are earning 50,000 USD each year, your projected annual retirement expenses is equivalent to around 40,000 USD and that amount of money will allow you to live comfortably.

The first step to calculating your target retirement savings is to know how much you will be spending for each year during your retirement.
Getting that amount is not so difficult. You would still have the same basic needs during your retirement period and your pre-retirement period.
You might be just cutting back on some expenses that you will no longer incur now that you have retired.

You may no longer be paying your children’s school fees; or your mortgage on your house. However, you will still be paying taxes and healthcare expenses. Add those up and you will get your retirement expenses that will be recurring each year of your retirement, assuming that you would be spending your retirement in your same home.
Although it sounds morbid to think of how long you will stay alive, your life expectancy is part of calculating how much needed to retire. Assuming you retire at 60, you would assume to be around for at least the next 30 years. Multiply your annual retirement expenses with the number of years in retirement and you get a rough estimate of your total retirement expenses. That total is your target amount that tells you how much you need to retire.
Social Security offers 25% of your pre-retirement income. Most pensions leave you with at least 12% of your pre-retirement income. Because of these two, you don’t necessarily have to save up on each cent of you target retirement expenses. However, you would only receive you full benefits when you retire during the normal retirement age. Deducting the amount you will receive annually from social security and pension from your annual retirement expenses, the remaining amount tells you how much needed to retire.
By knowing how much you need to retire, you can set a tentative age of when to retire and how much you have to cut back on your present income to arrive at your projected retirement expenses when retirement comes.

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