Whether that is possible is up to you.
Rising costs are causing people to worry about their retirement
An AARP survey found that retirees are worried about not having enough income to support their retirement needs.
Fox – 10 Phoenix
Many people aim to retire with $1 million. It’s easy to see why.
But while the $1.26 million figure doesn’t make much sense, it appears to be the amount Americans should aim to save, according to data from Northwestern Mutual.
But is a $1.26 million IRA or 401(k) enough to buy your dream retirement? It all depends on how you want to spend your retirement years.
It’s a personal calculation
All retirees have certain basic needs, such as food, shelter, transportation, and medical care. However, even within these categories, costs can vary widely. A 2,500 square foot home with a pool can cost much more to own and maintain than a 1,400 square foot home with a small backyard.
But beyond the basics, the amount of money you need in retirement will depend on what you want to do day-to-day. If you have inexpensive hobbies like hiking or reading, you’ll likely need less money to stay busy than someone who wants to spend their days playing golf or traveling the world.
So before you set your savings goals, it’s important to envision your retirement. Think not only about what you want to do each week, but also where you want to live, what kind of home you want to own, and how extensive your medical needs are likely to be (though you can’t always know for sure in advance, you can use your pre-retirement health as a benchmark).
If you convert it into an annual income, that would give you a nest egg of $1.26 million.
Your retirement funds may need to be maintained for decades. For this reason, it is important to withdraw your savings carefully.
Using the common 4% rule, a $1.26 million nest egg would give you an annual income of $50,400. This does not include Social Security, and monthly benefits vary depending on an individual’s salary history and filing age.
Of course, you may end up using different withdrawal rates. So even that $50,400 is not a given.
But if you want to know your target savings balance, estimate your annual expenses, subtract your Social Security benefits, and multiply it by 25.
For example, if you plan to spend $60,000 a year in retirement and expect to receive $30,000 a year from Social Security, multiply $30,000 by 25 to get $750,000. This is the best way to figure out how much you want to save, with the understanding that that number can go up or down as your plan changes.
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