How Much Retirement Savings Do You Need?
A recent study estimates that as many as 33% of Americans have $0 saved away for retirement, and over half have “less than $10,000.” Fewer employers offer any form of retirement package, and given the financial demands of the modern household, it’s no wonder that so few workers are able to save for the future.
But even if you have been able to save, it’s likely you may not have enough.
Determining how much money you need to retire can be difficult. Some experts say that you should plan to have 70% to 90% of what you earned while you were working available for you each month – an amount that would be well over $1,000,000 for the average retiree. Others say that you need 10 times your monthly income saved in a pension or 401K, which is about $500,000 for the average worker.
Rather than estimate, you can also try to do the math yourself:
- Add up current expenses
Add up all of the expenses that you have each month that you are likely to keep, including car payments, food, gas payments, home costs, bills, etc.
- Subtract Social Security
Subtract Social Security payments from this total, which currently averages $1,341 per month.
- Multiply by lifespan
Take that number and multiply it by the number of months you expect to be alive given your overall health profile.
If you calculate that you have about $3,400 in expenses, you will receive $1,341 a month in social security, and you pessimistically estimate that you’ll only be walking this earth for about 15 more years, you will need about $370,000 to live comfortably as long as you have no surprise expenses.
If you’d like to be a bit more optimistic and plan to be jogging until you are 95, you will need $741,000 at least to cover the costs of retirement, and more if you’d also like to make sure you have money in the bank for emergencies.
What to Do if Retirement is Not Enough
If you are like many retirees, you may be short on your retirement savings. That’s why more retirees are considering reverse mortgages.
Reverse mortgages allow you to take out a mortgage on a home that you already own, and use that money to cover the costs of retirement and other expenses while you still live in the home. They’re a great tool for those that haven’t saved $1,000,000 for their retirement, and would like to take away some of the financial pressures of retirement without having to move or sell their property.
Reverse mortgages may be exactly what you need to make retirement more manageable. For more information about reverse mortgages, contact me today! I also suggest using our Life Expectancy Set Aside calculator to estimate the funds needed to pay your property charges.