How Much Income Will You Need in Retirement?

how much money do i need to retire

It’s the (literal) million-dollar question.

We get it all the time here at NW Tax & Wealth, and we like to be as specific as possible with our clients about the picture of their financial future. That said, planning for retirement can be a moving target depending on your income situation, your age, your dependents, and your anticipated quality of life.

So, how do you really know how much you need for retirement, what’s overkill, and what’s not enough?

The Ballpark Estimates

A quick Internet search will turn up dozens of articles offering specific numbers surrounding how much money you need in retirement. Generally, these numbers run anywhere from about 75%-85% of your current income, annually, but they don’t paint the whole picture.

For example, your plans for retirement greatly impact how much you’ll need to live comfortably. If you’re in poor health and retiring early, you may need additional money to cover long term medical expenses. Conversely, if you plan to move in with your child after retirement to help care for your grandkids, you may not need as much to live comfortably.

Less than 50% of working individuals have actually considered the specific amount they’ll need to retire; most instead aim for a sizeable “retirement fund” that, while growing, doesn’t necessarily measure up to a specific financial need. We encourage you to speak with a qualified financial professional who has experience in creating retirement income strategies to help determine exactly how much you need to live within the specifications you put forth.

Factors to Consider

There are many more factors to consider when planning for retirement than how much cash you have sitting in an IRA or 401k. It’s important to factor in things such as payments from Social Security, pension plans, or even any insurance products you own, like annuities, if applicable. These monetary benefits can impact both your financial picture and your tax implications.

One oft-overlooked source of retirement income comes from dividends. At NW Tax & Wealth, we encourage our long-term retirement planners to consider a portfolio that produces sizeable dividends. Producing this kind of portfolio has as much to do with fine-tuning your stock portfolio as it does continually investing in the account. Of course, there are plenty of “safer” blue-chip stocks and bonds that also produce high-quality dividends.

How to Know if You Have Enough for Retirement

There are plenty of retirement calculators out there meant to give you peace of mind regarding your future financial picture. While they can easily determine whether or not your retirement plan is way off base, there’s no way these impersonal tools can give you an accurate assessment of your financial ability to retire when and how you want to. Only a qualified financial professional can do that.

The smartest way to get a handle on whether or not you’re saving enough for retirement is to work with a team of professionals whose job it is to assess your risk, strategically allocate your money, and keep tabs on the progress as the years go by. That’s where NW Tax & Wealth comes in. When you’re ready to find out more about your future in retirement, contact our office. We’re happy to help.

By contacting NW Tax & Wealth, you may be offered information regarding the purchase of insurance products. All of our financial professionals are licensed insurance agents. Additionally, some individuals may also be registered with a broker/dealer or as an investment adviser. Our financial professionals do not offer estate planning, tax or legal advice. Always consult with a qualified advisor concerning your own situation.

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