How Much Money Do You Need To Retire?

One of the first steps in planning for your future is understanding how much money you’ll need for retirement. No magic number or formula guarantees you’ll have what you need. But with some planning, you can take steps toward setting up a comfortable retirement.

The amount you’ll need for retirement depends partly on your earnings and savings. As a rule of thumb, you’ll want to save enough so your withdrawals and benefits will be similar to your pre-retirement income. That way, you could keep your current standard of living.

You have many ways to stretch the long-term value of the dollars you earn today. Some of your planning might involve legal matters, such as creating your estate plan or appealing denied Social Security benefits. When you need help, speak with a local lawyer about your retirement concerns.

Consider Your Costs in Retirement

There’s no way to know your life expectancy, but planning for a long retirement is a good idea. What money will you need to live comfortably for those years?

Here are a few things to keep in mind when making your calculations:

• Longevity and health: You can estimate your lifespan based on your birth year. But it’s also helpful to consider family medical history, medical issues, and general health factors. If you have a severe medical condition like heart disease, consider including treatment or long-term care costs in your calculations.
• Increased costs over time: Rising health care costs and inflation mean that money saved today will have less spending power tomorrow. You will want to keep much of your retirement savings in accounts that offer a return on investment at or exceeding inflation rates.
• Retirement lifestyle: Planning to live off of 80% or more of your current income in retirement is often recommended. But you may want to adjust this amount depending on your desired retirement lifestyle. For example, if you intend to travel a lot, you may want to save more than 80%.

Online retirement calculators can estimate how much you need to save. Though they can give you rough benchmarks for your progress, they can’t replace professional advice. You might have specific concerns, such as protecting savings to support a family member with a disability well into the future. In such cases, a qualified lawyer may be a better resource for you.

Current Assets Are Your Starting Point

Calculate your assets, such as cash, investments, property, stocks, and bonds. Include any money in employer-sponsored retirement plans, like 401(k) plans. Consider whether you have a pension. All of this is money you can count towards your retirement savings.

Remember that you may be entitled to Social Security Administration (SSA) retirement benefits. Your Social Security monthly benefit amount may be a significant income source for you in retirement. Check your latest Social Security statement for an estimate of your Social Security retirement benefits.

If you wait until the full retirement age of 67 to collect, you will receive 100% of your benefits. If you retire early, you will receive a reduced monthly benefit. Social Security benefits include an annual cost-of-living increase designed to combat inflation.

But remember that, depending on when you retire, the SSA may be unable to pay you full benefits. This is because the Social Security trust funds are scheduled to deplete in 2033. Without any government updates, the SSA will pay only 77% of scheduled benefits at that time.

Retirement Planning for Inflation and Economic Changes

Many people are concerned about historic and rising inflation and a possible economic recession. Your investment returns would need to exceed inflation, account for your remaining tax liabilities, and still show enough growth to support your financial goals.

Higher costs of basic necessities like health care and groceries can be a concern for retirees. The inflation rate varies each year. The unpredictability of inflation makes it difficult to know how much you’ll need in your 60s and beyond.

You can make a few investment choices to lower the impact of market factors on your retirement fund. These choices include ensuring your portfolio is well diversified. You can also save early and invest often to maximize growth over your lifespan. You may also want to cut back on spending as you near retirement.

Since these choices are complex, you may want advice for your specific financial situation. A financial advisor could explain how inflation and economic recessions could impact your portfolio. Other related issues, such as estate planning, may require the help of a lawyer.

Selecting the Best Retirement Plan for You

There are many types of retirement plans. These include 401(k) plans or individual retirement plans (IRAs).

Most work-sponsored 401(k) plans offer matching employer contributions. Under these plans, if you contribute a percentage of your income to your 401(k) plan, your employer will contribute the same amount, up to a maximum rate. It makes sense to take full advantage of your 401(k) matching contributions to avoid leaving money on the table.

401(k) contributions are tax-deferred, meaning you only pay income tax to the IRS once you withdraw it. There are annual contribution limits with a 401(k). After 50, you are allowed to make greater “catch-up” contributions. You must begin taking distributions by age 73, but you can start collecting retirement income without penalty at age 59 and a half. Roth IRA 401(k) plans, offered by some employers, allow you to withdraw your contributions at retirement tax-free.

If you don’t have access to a workplace retirement plan, or even if you do, you can open an individual retirement account (traditional IRA) or an annuity for additional retirement savings vehicles.

When To Call a Retirement Lawyer

Saving for retirement is typically a matter of personal finance rather than a legal problem. However, there are certain situations in which you may want to consult with a lawyer to protect yourself and your money.

Consider getting legal advice in the following types of situations:

• A financial advisor broke their fiduciary duty to you
• Your employer denied benefits you qualify for or mismanaged your retirement plan
• You want to set up a trust, grant powers of attorney, or other estate planning documents alongside your retirement savings
• You retired, but the Social Security Administration denied your benefits
• You own a business or are self-employed and want to set up a simplified employee pension (SEP)
• You’re getting a divorce and want to protect your pension or retirement fund in the proceedings

The type of lawyer you should hire will depend on your legal concern. 

Get Professional Legal Help

Thinking about future survival — and planning for success — is tough. But it’s not something you need to do alone.

Contact a financial planning lawyer or Social Security retirement attorney to discuss retirement savings plans and investment strategies. A professional can help you balance your risks and potential returns.