How Much Money Do I Need to Retire?

A lot depends on how much money you need after you retire considering debts and living expenses.

There are several retirement calculators online which can help you answer the question, “How much money do I need to retire?” You can see how much you need to save to have a certain amount of money when you retire. It takes into consideration your age, retirement age, current salary, percentage of your income you can save, an estimate of your Social Security benefit and other factors.

If you can look forward to a pension and Social Security benefits, you may not need to save much for retirement. A lot depends on the lifestyle you want after retirement and how many things you can do without.  If your house is paid for and you don’t have a lot of debt, then you may be able to financially handle the basic necessities. However, if you want to continue with a lifestyle comparable to the one you had before retirement, you will need to do a great deal of saving and investing.

A good rule of thumb is you will need 70 to 80% of your income after you retire.  This is because you will probably have fewer expenses when you retire, including no dependents, no mortgage, and you will no longer be saving for retirement. 

If you are many years away from retiring, you need a 410k plan or an IRA. These are two of the best ways to prepare for retirement. If you are in your 20s, you need to save at least 10% of your salary and preferably more. 

As you get older, you should try to increase this amount. Some investment counselors say to increase your savings to between 15% and 25% in your 30s and try and raise that amount as you get closer to retirement age. It boils down to a choice of living below your means now or barely surviving when you retire.

Social Security

In answering the question, “How much money do I need to retire?” you need information about your Social Security benefit upon retiring. So many people were out of work during the Great Depression, that Congress implemented social insurance because over 50% of senior citizens were living in poverty. 

The Social Security Act was passed in 1935 to help with the elderly, unemployment, poverty, widows, and children without fathers. This was the first legislation to be passed that offered protection to senior citizens. The Act provided for death benefits as well as help for the unemployed and retirees. It also gave money to states to help finance unemployment insurance, aid to the elderly and the blind, welfare for mothers and children, and other public health services. 

When the Social Security Act was passed, there was much controversy about it.  Many feared it would cause the loss of jobs. People in favor of the Act claimed it would enable older workers to retire, leaving job openings for younger workers, which would actually lower the unemployment rate. Currently, the benefits paid to retired persons come from payroll taxes on current employees wages and their employers. 

Retirement Statistics

Retirement has changed over the years. Many times today, a person retires, only to go back to work later. Sometimes people retire to go back to school or start another career or business. True retirement is occurring much later in life for many. There are many retirees working, so statistics can be misleading. Here are some of them:

• Actual retirement age in the United States averages around 58 years old.
• 70% of American Baby Boomers plan to work into their 70s. 
• There are 77 million Baby Boomers and one of them becomes 50 every seven seconds. That comes out to be four million a year.
• Within the next 25 years, there will be a million people in this country who are the age of 100 or more.