Everyone has to face the retirement period. It’s just that some people begin retirement early and some people begin at a later age. Nonetheless, whenever you retire, you must plan your annual retirement income.
This means determining how much money you need so that you can spend your retired life comfortably. Many experts recommend that your adequate retirement savings should be equal to 10 to 12 times of your current salary.
People who are near their retirement age should take this more seriously. In fact, such people may get a tad anxious after listening to these figures. However, the actual average monthly retirement income varies from one person to another depending on various factors, such as your residing place, your health right now and in future, your lifespan, etc.
Below are some pointers to consider when planning your best retirement earnings. These tips might help you in calculating the optimal number for your retirement income.
Be Aware of the Duration of Your Savings
After you have decided how much money you need to save, you want to know how long your retirement earnings will last. A lot of people overlook the longevity factor when they make their retirement saving goals.
Therefore, you should consider how long you will live in order to determine how long your retirement income should last. For instance, according to the Society of Actuaries, there is a 43% chance that an upper middle class and healthy person aged 65 years old might live to 95 years old. Thus, the retirement savings must be adjusted according to your current health and your projected lifespan.
Consider Inflation and Interest Rates
When you calculate your savings, you must also pay attention to the inflation and interest rates, which can alter anytime. You can’t know how and when the rates will change in the imminent years. For instance, if a retiree wants $40,000 per year in their retirement period, then they need to save nearly $1.18 million if the retirement period consists of 30 years. This figure was determined after taking into account 6% returns and 2.5% inflation.
Start Saving Now
For those of you who haven’t started building your retirement nest egg, begin immediately. You shouldn’t give up based on reading the figure you need to save. Just start saving, and, over a few years, you might be able to double your nest egg owing to the compound interest.
For instance, if the financial market provides 7% interest per annum, then your money may double in a decade. Some of the steps for saving your money for your retirement can include keeping just one car instead of two, lowering your expenses, reducing your travel, etc.
These are just a few tips and tricks to consider when planning your retirement income. Take steps toward adjusting and increasing your nest egg and aim to enjoy your retired life free of financial troubles and worries.