Have I Saved Enough Money to Retire?
Do a quick Google search for “cost of retirement” and you’ll be inundated with various numbers or multiples.
One website says you’ll need more than $700,000 and another site recommends $1.2 million. There are too many variables to account for to get a single answer. However, we can look at some data to help us figure out what issues may need to be considered to address the question, “Have I saved enough money to retire?”
Assess Future Expenses to Understand if You’ve Saved Enough Money to Retire
Health Care Expenses
One of the largest (and most often overlooked) costs in retirement may be health care. The Employee Benefits Research Institute states that the median lifetime health care costs for a married couple (retiring at the age of 65) will be between $169,000 and $273,0001. These costs include things like Medicare, supplement insurance premiums, and out-of-pocket prescription drug expenses.
Another big cost may be housing. Even if you’ve paid your mortgage off, you’ll likely continue to shell out thousands of dollars each year to cover insurance and property taxes, as well as any maintenance, repairs, or improvements. These expenses vary greatly, depending in part on the state you choose to retire in. While living in a state without income taxes, like Texas, may sound appealing, consider that the average property tax is more than double the amount in the neighboring state of Oklahoma2.
Getting Help is Encouraged
As you do more research, you may see other estimates, such as having 10-12 times what your annual income is accumulated in your savings account. While this is considered a good rule of thumb to get you in the retirement ballpark, the best answer to this question is to develop a retirement plan. Working with a financial planner who can review your current monthly spending, as well as project future retirement expenses you may not be aware of, is likely to give you a better estimate on what retirement will cost you, and not just the typical retiree.
If you’re just starting the process and asking yourself these questions, consider downloading our Retirement Plan Checklist. In this checklist, you’ll find two timelines: one based around how close you are to retiring, and the other is based around how old you are. Next, you’ll answer 30 questions to be sure you and your advisors have covered all the key points of income, tax, asset, and risk planning in creating your plan.
Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.
The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.