Do you know how large your financial portfolio will need to grow to take you comfortably into retirement? A retirement savings calculator can only go so far; it all depends on the quality of life that you expect to have, the projected growth of your financial portfolio and how long you intend to continue working.
Calculating Your Income Needs in Retirement
Calculating your income requirements begins with an understanding of how much you will need to maintain your current quality of life. Every person is different and accustomed to a specific financial situation.
Cutting your costs too far may result in a difficult retirement or a financial portfolio not lasting throughout the retirement.
Generally, most people will want at least 80% of their current income to maintain their quality of living – but they may need more if they anticipate any serious health issues. 60% or less of your current income will generally lead to a more difficult retirement unless downsizing significantly or moving to a more affordable region. 90% of your current income is generally a very safe estimate.
Calculating Your Time Spent in Retirement
Time spent in retirement has a very significant impact on how much money will need to be saved. For those who plan on retiring early, it becomes necessary to build a very strong financial portfolio; not only is there less time for interest and earnings to accrue, but you will need to rely upon the portfolio earlier and for longer. The average retirement age has been steadily increasing. Though the ideal retirement age has often been considered 62, the average expected retirement age today is 66 and is expected to continue increasing. With the average life expectancy now hovering around 90 years, the average retiree will spend 20 years in retirement.
FMT Advisory offers personal financial planning and market analysis for those who are concerned about the strength of their personal finance and retirement portfolios. Contact FMT Advisory today for financial counseling and investment information.