How to Determine How Much You Need for Retirement

Planning for retirement is no small feat. After all, you'll probably spend decades working, with retirement in mind. So, when will you be able to retire comfortably? Do you even know? The best way to determine when you'll be able to retire (and in the lifestyle you are accustomed to) to is to determine how much you need for retirement. Here are some tips for how to do just that:

Your current cost of living. Your starting point should be to figure out how much your lifestyle costs you today. Sit down and write out your budget. Be sure to include necessities, as well as things like entertainment, vacations, and clothing. The figure you come up with is your current cost of living, or how much you need to make in order to maintain your quality of life.

Your projected cost of living. Of course, inflation guarantees that your future expenses will be higher than your current expenses. You'll need to add about three percent to your expenses for each year in order to get a fairly accurate idea of what your cost of living will be by the time you retire and throughout your retirement years. For example, if you currently need $30,000 a year and plan on retiring in ten years, then your cost of living at the time of your retirement will be a little over $40,000. Additionally, you'll need to account for inflation for each year of your retirement.

Life expectancy. As you don't know how many years you can expect to spend in retirement, err on the side of caution. A standard rule of thumb is twenty-five years. Therefore, you will need to add up your projected cost of living, inflation and all, over the course of twenty-five years. Generally speaking (according the stats of the average American), you will most likely need somewhere around two million dollars in order to retire comfortably and safely.

Savings. It's not necessary that you save all of the money you'll need for retirement, so you can breathe now. By the time you retire, you should have outside sources of income to contribute to paying your expenses. Add it all up - pensions, retirement account funds, military benefits, trusts, etc. - in order to determine exactly how much you will need to save before your big day arrives.

So now you know how to determine how much money you will need to retire. Your next step is to figure out how you are going to accomplish that. Your best bet: start saving money , and now.

Gaylene Tynum is an EKG technician who loves working with potential medical students. She often recommends sites like ekgtechniciantraining.net to those interested in a similar career path. When she's not helping others, she spends a lot of time planning for retirement, ensuring she'll be comfortable in her golden years.

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