When it comes to retirement savings, many Americans have fallen behind. Most people don’t even know what they’ll need when it comes time to retire. The first step in succeeding at a plan is actually having one in place. A solid retirement plan will need to go through the process of figuring out what a household will need.
Estimated Expenses
The first number that should go into a retirement calculator is a family’s estimated annual expenses. Everything else will flow from this one number. A household that expects to spend $200,000 in retirement will need to save and invest more than an individual who might be able to survive comfortably on $25,000 a year. This number is frequently the most flexible. People can adjust their spending levels to minimize what they need.
Estimated Life Expectancy
Another important number that’s important in the retirement planning process is a person’s estimated lifespan. Those with a family history that makes a living past 70 unlikely will probably need to save less than a person who has a number of family members who’ve lived into their 90s. Increased life expectancy means more funds will be necessary to comfortably retire.
Don’t Forget Social Security
Some people who start planning for retirement early forget to count Social Security into their calculations. It’s possible that payments will have to drop in the future unless Congress acts to shore up the Social Security trust fund. However, it’s highly unlikely that the country will decide to drop this retirement program altogether. Ending Social Security is a step that would be very unpopular with the vast majority of Americans who have paid taxes into the program for decades.
The earlier people start thinking about retirement, the more likely they will be to achieve success. It’s important to take life expectancy into account along with the amount of money that will be necessary to fund estimated expenses. Social security will also likely provide some income after age 62. After calculating these numbers, it’s possible to come up with the level of savings that can fund what’s needed to safely retire at any given age.