What Is The Right Amount Of Retirement Money For Me?
November 10th, 2022
During an appointment I had with a client on retirement recently, the conversation moved to questions related to how much money would be necessary for them save in order to retire. Is my investment allocation appropriate? How much do I need in savings?
These questions focus on the person and what is right for them. How do we know what the correct dollar amount or percentage is for savings, retirement, housing, investments, etc.?
Like many things in life, it comes down to the details and the fact that what is appropriate for one person may not be for someone else. We have different needs and wants, spending patterns, and emotions- the answer requires an understanding of who you are as a person and your values.
One way to determine your specific retirement needs is a method that many financial advisors and institutions use: a person will usually spend/need 70% to 80% of pre-retirement income. We can come up with an answer by figuring out current spending. If we know what we need currently, we can then take 70 to 80% of that amount and get an idea of what we would need during retirement.
Another important factor is the timeline for retirement. How much money will be earned through pensions, social security, and personal savings, including retirement accounts? What is your investment risk tolerance and investment experience? What plans do you have for your short, medium, and long-term goals, both financial and non-financial? The focus should be on what is important to you and your family.
Financial experts agree that we should all have three to six months of savings in an emergency fund. Many of the people (and fellow staff) we work with would be happy if they could save a month’s worth of expenses as this is difficult to achieve with limited resources. There are many of us that make savings a priority and contribute monthly to a savings account. There is value in adding monthly to the emergency fund, regardless of the amount, little by little, the amount will grow!
Our financial coaches help families feel more secure with financial decisions as well as with budgeting, retirement planning, and savings goals. Please feel free to reach out to us with any questions you may have, we are happy to help!