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| Financial planners estimate you'll need 70-80% of your current income to maintain your current lifestyle in retirement. Even though some costs such as medical care and insurance may increase after you retire, other expenses may decrease because you may no longer be making mortgage payments, paying for education, commuting, or incurring other work-related expenses. In determining how much you should save, there are three additional factors you should keep in mind. |
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People are living longer. Current studies indicate that on average, an individual retiring at age 65 today is expected to live at least another 20 years. So, you will want your retirement savings to cover your income needs for that long or longer, depending on when you decide to retire. |
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Inflation can chip away at the value of your savings. Over the past 20 years, for example, prices have been rising at an average annual rate of 3-4%. If inflation continues to stay around that rate, the $50 you pay today for groceries will increase to more than $100 in 20 years. |
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Social Security may not be enough. For those who've spent many years in the workplace, Social Security may replace some of your income during retirement. But recent statistics project that for many Americans, Social Security benefits will cover only about 35% of their current living expenses during retirement. |
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| To compensate for these factors, you'll need a sound retirement savings plan. If you already are contributing the maximum allowed to your company retirement account, you may want to consider other retirement vehicles to supplement your savings including IRAs and Annuities. |
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