Whether you’re nearing retirement or not, it’s never a bad time to consider your plans and how you’re going to support yourself and your dream retirement.
One of the burning questions that people often ask first is,
“How much money do I need to retire?”
Admittedly, it’s probably the most critical question you can ask once you start retirement financial planning. Of course, depending on your age and lifestyle preferences, the answer to this question is highly varied.
Here, we will discuss what you need to consider to know how much you need for your retirement financial planning.
What Kind of Lifestyle Do You Want in Retirement?
First and foremost, you need to think about what kind of life you want post-retirement. What does the perfect retirement look like for you? What do you envision yourself doing when you finally retire?
For some people, retirement is their chance to finally spend most of their time with their family and loved ones. It’s a time to relax and just do what you want without worrying too much about anything.
For other people, retirement means doing everything they didn’t have the capacity to do in their life. This usually means travelling, adventure, and other big-ticket things.
If you want the same level of comfort and freedom you have while working, you’re going to need to save more. On the flip side, if you’re going to live more modestly, you may be able to get by with less than before.
What Will You Spend Money On In Retirement?
The next thing you need to consider is your day-to-day retirement expenses. You may want to start calculating how much you spend and what you spend on the way before you retire.
Here are some things you should ask yourself:
- How much do you spend on groceries and everyday items?
- How often do you eat out at a restaurants or cafes?
- How many local or international holidays do you take each year?
- Does your house need renovation or maintenance?
Beyond your day-to-day expenses, you also need to make room and give yourself an allowance for miscellaneous expenses—things you want to splurge on— hobbies, social activities, gifts, and so on. You also need to have enough money to cover unexpected costs related to your health or aged care.
How Long Will You Be in Retirement?
Life expectancy plays a significant role in your retirement financial planning.
In fact, Australians are living longer as life expectancy for both males and females has increased over the past decade.1
In general, the longer you live, the longer you’ll be in retirement. That’s important to consider when you are saving for retirement.
Of course, you don’t need to stop earning when you retire entirely. You could always transition into retirement and slowly get more and more comfortable with your finances. Or if you have investments, these may provide you with a great source of income in retirement.
Saving for Retirement with the Help of a Financial Planner
The truth is, there is no particular dollar amount that applies to everyone in retirement.
For those of you that are nearer to retirement age, the question of how much to save is more applicable. While that number will depend on the kind of lifestyle you want to lead, you need to consider things are the same.
Get the right advice for your retirement financial planning. EJM Financial Services provides simple, tailored financial solutions to help people achieve their financial goals at any stage of life. Request a meeting with us today to discuss your financial needs and goals!
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