It's hard to prepare for retirement, and it takes a lot of hard work and sacrifices to save enough to enjoy your golden years comfortably.
Despite the challenges of gathering enough savings to withdraw comfortably, 38% of retirees say they felt extremely or very confident about their savings before retiring, according to an Associated Press-NORC Center for Public Opinion poll. Affairs Research.
It may sound like a good thing – and on the surface it is. There are plenty of eye-catching statistics on how unprepared the average American is for retirement, so it seems to be a positive shift when nearly four out of ten workers say they are confident in their savings.
However, trust can sometimes be dangerous, because it encourages you to let you know. The average pensioner is expected to survive his savings by about eight to ten years, according to a study by the World Economic Forum, so even though so many current retirees are confident about how much they have saved, the average pensioner will probably still run out of money at some point in time. .
Pensions are more expensive than you might think, and underestimating how much you need to save can lead to a financial disaster down the road. This will ensure that you accurately estimate the cost of retirement so you can be confident in your savings.
The Real Cost of Retirement
How much your retirement will cost depends on your lifestyle, so it is different for everyone. That said, it can be more expensive than you expect.
The average American age 65 and older uses about $ 46,000 per year, according to U.S. Pat. Bureau of Labor Statistics. At that rate, if you were to spend 25 years in retirement, you would end up spending around $ 1.15 million – not accounting for inflation.
If you are facing expensive health problems when you age, health care costs can cause your expenses to skyrocket. Long-term care alone can cost hundreds of thousands of dollars; You can expect to pay around $ 6,800 a month for a semi-private room in a nursing home, according to U.S. Pat. Department of Health and Human Services, which amounts to approximately $ 81,600 per year. About 70% of retirees will need long-term care at some point, according to the Department of Health and Human Services, and the average person needing long-term care will require it for about three years. For $ 81,600 a year, it's a total cost of nearly a quarter million dollars.
As if this figure is not hard enough to swallow, the kicker is that Medicare does not cover long-term care – so all these expenses will probably have to be paid out of pocket.
In short, retirement can be incredibly expensive. However, about 75% of workers believe that retirement will cost less than $ 1 million, according to a survey by American Advisors Group, and nearly 40% think it will cost less than $ 250,000.
This is where trust can be dangerous when You are planning retirement. If you've beaten $ 250,000 in savings and you're sure it's enough to last the rest of your life, stop saving and thinking you've reached your goal. Or you can even choose to retire early on the assumption that your savings will last as long as you need them. Although trust itself is not necessarily a bad thing, it is crucial that you also have realistic expectations of how far your money will retire.
A Realistic Approach to Retirement Planning
It is possible to be confident about how much you have saved for retirement, but it is important to make sure you look at the whole picture. Several key factors affect how much pension will cost, and miscalculation on some of them can dramatically affect how far your savings go.
One of these factors is how much you expect to spend each year on retirement. Many retirees end up spending less in retirement than they did while they were working, but that is not always the case. If you have expensive plans set up after leaving the job, the cost may increase. Although no one can predict exactly what type of health problems will emerge in the future, if you have a family history of a particular disease or disease, it may be worthwhile to include it in your retirement plans – especially if medical treatment is expensive.
Another factor to consider is how the benefits of the insurance will affect your savings. The benefits alone will probably not be sufficient to support you in retirement (the average check amounts to just $ 1 461 per month, according to the Social Security Administration), so make sure you're not going to be overly dependent on them. If you require benefits before you reach full retirement age (which is 67 years of age for those born in 1960 or later, or either 66 or 66 and a few months for those born before that), the monthly check will be reduced by up to 30%. So before making claims, make sure you know how your age will affect how much you get.
Life expectancy is another key factor to consider when planning retirement. While you cannot predict exactly how long you want to live, estimating will help you figure out how long your savings will last. One-third of today's 65-year-olds can expect to live for at least 90 years, according to the SSA, so it's likely that you can spend decades in retirement.
When you have as much information as possible about the cost you get When you are employed in retirement, you can enter the numbers into a pension calculator to see what you should aim to have saved before you leave. With that figure in mind, you will know what you need to save to feel confident that your money will last for the rest of your life.
Of course, there is no way to guarantee that your savings will last as long as you need them. The more time you spend on retirement planning and understanding how much it will cost, the more confident you will know you've done everything you can to prepare for the future.