Estimating your retirement needs
By Sara Peak from August 2014 Issue
Everyone seems to want to know the "magic number" for retirement. That's the specific dollar amount that should be socked away to ensure a comfortable retirement. Unfortunately, there is no "magic number." Your comfort in retirement will focus mainly around your cash flow. There are several factors to consider.
EXPENSES Before you can determine your potential retirement cash flow, you need to consider your retirement expenses. While many work-related expenses may decrease during retirement, other types of expenses, such as travel and health-care costs, may increase.
INCOME Will you have any other income during retirement? This includes rental income, part-time work, or guaranteed income from annuities. It also encompasses pensions and Social Security benefits.
DEBTS AND ASSETS What kind of debt will you have in retirement? Mortgage? Car payments? Calculate the kind of assets you will have beyond your retirement accounts and whether any of them are liquid (easily accessible).
You should closely review your expected retirement income and expenses. The gap between the two is where you will need to rely on your lump-sum retirement savings.
SARA PEAK is a freelance writer with expertise in finance and wealth management. Have a money question? E-mail us at firstname.lastname@example.org.