Congratulations! You Made It.
Nearly every working adult’s dream is a comfortable retirement, financial peace of mind and to just be free to enjoy what life has to offer.
Your retirement age is approaching, and it’s important to check your numbers to be sure you’ve considered all the factors. Current expenses and future expenses like health care. The younger you are, it might be difficult to know exactly how much to save, especially with the consistent changes in the economy. Aim to put away as much as you can. Also, determining you retirement number, how much money you would need for retirement, can be calculated.
Some countries offer government pension plans, a thank you for your contribution to the country’s economy. Depending on when you would like to access the funds, changes the monthly benefit amount. You ought to see this as an added benefit towards your retirement number and not your primary source of income because the benefit often times isn’t enough to make a decent livelihood.
One rule of thumb for knowing how much to take out of your retirement account each year is the “4% rule”. How this works is, you would withdraw 4% of your retirement savings each year and what you draw on is your “income” from your retirement savings. The more you have saved, the higher your “income”. The 4% rule is designed to prepare you for 30 years of income after retirement. However, if your expenses are higher than your income, you may have to draw on more than 4%, and potentially drawing your savings down faster. Unfortunately, that’s where many people get into trouble. This rule is truly just a starting point, and you should save as much as you can now.
Mentioned earlier about planning for your future expenses, health care is a big topic not often discussed. The older you get many typically don’t get healthier. In North America, upon retirement, the average out of pocket health care expenses is about $6,000 annually and that often catches retirees by surprise. It’s relatively easy to budget for housing, food, utilities, and other essentials, but medical care costs can vary widely, spring up at random times and can cause your actual expenses to be much higher or lower than average estimates.
Building a strategy to have multiple sources of income, will better prepare you for retirement. Taking the time to prepare now is essential. Once you stop working, there might be less room for mistakes and fewer ways to earn additional income. Believe that there’s no such thing as having too much retirement savings when you enter retirement. Bank as much as you can.