Your Retirement Number

There used to be sayings and a rule of thumb that you need to save enough money to live on 75 to 85 percent of your pre-retirement income. But lately, financial experts are saying that your expenses pattern should determine how much you need to save for your retirement.

Rather than picking an arbitrary number based on the salary that you have negotiated with your current company, you should figure out how much money you want to live on each year during retirement. Multiply it by 25. All you need to do know is to do a backward calculation on the amount of money that you need to save.

It makes sense. Because even tho if you have a lot of money at the end of your retirement, if you have huge expenses as well it will not feel as much. The one critical approach to help you save for medicare plans 2020, and calculating your retirement number.

Below is the step approach to determine the amount of money that you need:

1. Finance

You need to take a closer look at the amount of expenditure that you do. You need to ask whether you will have children that will depend on you for financial support after you retire, and you need to consider the cost of sending them to college and possibly helping support them through graduate school.

You also need to take into account the health condition for you and your spouse. Medicare handles some of the costs but there are a lot of out of pocket expenses that you will need to pay as well. This includes indirect medical costs like fitting your home to be wheelchair friendly.

You need to calculate as well if you have any debt, or if you have any home mortgage that will be fully paid by the time you retire. You also need to calculate how high your property taxes and homeowners insurance.

All of this estimated cost to your current budget, and you will be able to roughly get the picture of the amount of money that you need.

2. Social security and pension income

The next step after calculating the amount of expenditure that you might have is to calculate the amount of social security and pension income that you might have. These two serve as an additional income when you retire. If your employer gets a pension, then you should ask them how much you will receive.

Your social security mails you a form once a year that tells you how much you are eligible to receive in retirement, based on your current contributions.

In this calculation, you can add another source of retirement income such as income from rental properties, royalties, and others.

In the end, subtract the amount of money that you need with whatever earning that you will have. Multiply the number by 25 and you will get the amount that you will need to withdraw from your portfolio.