Healthcare and emergency facilities have definitely improved over the years, allowing higher life expectancy for individuals. Being able to enjoy the bounties of this planet longer is a nice proposition, but it comes with one special headache — you must have more money in your retirement fund if you wish to negotiate the ‘extra’ years well.
How much money is good money to retire on?
So how much money is good money when it comes to the question of retirement? How much should you retire at 60 with? Let me first give you the practised rule of thumb: it says that if your expected after-tax retirement expense is $60,000 on an annual basis, you must have 15 times the money in your kitty if you want to retire at 60. This comes to $900,000.
This amount can change with a change in the anticipated age of retirement. If you want to call it quits at 65, the expense comes down to 13 times the annual expense, let us say, $780,000.
Detailed approach, not a ballpark idea needed
While the approach mentioned above gives you a ballpark figure as to how much you may need, it will always do you good to go beyond a cursory evaluation and look into your post-retirement needs in detail.
Break expenses under different heads
Based on whether you are single or a couple, try figuring out food, clothing, transport, leisure, communication, housing, and health expenses as early as now. Of course, have two columns ready. In one, jot down the amount you may need annually under all these heads if you want to go for a modest lifestyle. In the next, jot down what you may require if you need a comfortable lifestyle.
The first years are high on expense
Another thing that we have witnessed at large is the propensity of retirees to spend a lot of money in the first few years of retirement. It is a natural human reaction to the first years of perceived bliss after a lifetime of hard work. Naturally, the expenses can become scary but thankfully, they even out in the long run. So, you can make a few trips here and there and plan a few purchases you have yearned for your whole life. Life itself will take care of it, don’t worry.
How are you planning for your retirement ahead? Are you starting to build your retirement fund?