Many individuals have a specific monetary goal for their retirement savings. You can use an online calculator to determine what goal you should have for your retirement fund, or you can utilize the services of a qualified financial planner. When deciding how much to save for retirement, keep the following details in mind.
1. Will your home be paid off?
A mortgage payment is one of the largest monthly expenses for many retirees. If your home will be paid off before you retire, this significantly reduces your fixed monthly expenses. Lower monthly expenses means that your retirement savings goal will decrease.
Some future retirees may pay their homes off before retirement simply by paying their mortgages as scheduled. Others may have to accelerate their mortgage payments or make a lump sum to pay off the balance. If your expect to have a mortgage for a portion of your retirement, talk to a financial adviser to see if paying the loan off early is the best decision for your financial future.
2. What kind of lifestyle do you plan to lead in retirement?
The type of lifestyle that you want to lead in retirement plays a big roll in how much money you should have saved. If you want to spend much of your retirement traveling and visiting new places, this will require significantly more funds than if you plan to spend your time volunteering and learning new hobbies. You not maintain the same spending levels throughout all of your retirement; some people may devote a few years to traveling and tackling items on their bucket lists. As they age, they may decide to lead simpler lives with lower expenses.
Another item to consider is whether or not you plan to work in retirement. For many retirees, a part-time job is a great option to help them keep busy and maintain regular socialization. Others may decide to open a business.
3. Are there any large expenditures you will need to pay for?
Depending on your family's needs, you may need to pay for large expenditures during your retirement. Some common pricey expenses include college tuition, wedding costs, home improvements, and automobile purchases. If you know you will need to pay for costly items, you can add a specific amount to your retirement savings goal, or you can make these items a line item in your budget.
For example, you may decide to set aside $4,000 a year for home repairs. Should you decide to skip home repairs for a few years, you can just keep the money in savings until you need to use it.