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How Much Do You Need To Retire?

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Retirement can seem distant and abstract, especially if you haven’t critically thought about it. But it is by adopting the right strategy early enough that we can ensure the comfort of our aging days.

It is not that difficult to prepare well for retirement, as long as you are efficient in your choices and realistic with your personal situation.

Most U.S citizens are eligible for public pension plans or are enrolled in group savings programs offered by their employers. However, even those who have access to these financial resources may need other tools to live a retirement that meets their expectations.

Retirement savings is probably the most common investment discussion in the country. But what steps should you follow to plan for retirement without taking too much from your disposable income?

How much should you put aside? How should you do it? ‘Or’ What should you invest in? How often should you contribute?

Proper retirement planning can help answer these questions.

1. Clarify Your Vision

Before estimating how much money you will need in retirement, first ask yourself what you want to do with it.

The arrival of retirement will bring a whole host of potential changes to your lifestyle. Will you stay in your current home or will you want to move? What will you do with all your days?

Sometimes future retirees neglect to do a realistic self-examination – you need to ask yourself the following questions:

  • What will my interests and hobbies really be?
  • What will my energy level be to accomplish certain tasks?
  • What will motivate me daily?
  • Will it be realistic to live in the countryside? Will the downtown condo still meet my needs when I no longer have to endure rush hour?

Be realistic and honest about your expectations and your personality. When it comes to retirement, not everyone faces the same challenges and opportunities.

 2. Plan For Unforeseen Events

Regardless of the age at which you want to retire, it is important to understand the financial consequences of losing employment income and to plan for unforeseen events that may arise in the meantime. Health status and family constraints are important factors to consider when determining the ideal time for retirement.

3. Calculate the Income Needed after Retirement

Experts generally agree that a retiree needs 70% of the average gross annual income of their last three years of full-time work to be able to maintain their standard of living1. However, a decrease in certain expenses or an increase in health care costs can cause this percentage to vary.

4. Identify all Possible Sources of Income

Several sources of income can finance retirement, either through government benefit programs or through personal savings. It can be helpful to hire a financial planner and adviser to fully understand all the options available.

Of course, the evolution of the markets and the economic context can modify the amounts that one will need during the retirement period. This is why it is important to make the most of your personal savings during working life.

5. Compare Predictable Income and Estimated Needs

To properly determine the amounts that you will need to withdraw at the time of retirement, the best solution is to compare the foreseeable income and the estimated needs. This is where inflation comes in: for example, if a saver’s lifestyle is currently costing them $ 20,000 per year, it will cost them $ 31,159 to maintain their purchasing power in 15 years. (Based on inflation at 3% per year). Hence the importance of choosing investments whose return exceeds inflation.

6. Choose an Investment Style

Once you have established your retirement expenses (taking into account specific travel plans, hobbies, or other activities), you can get a pretty good idea of ​​the return you will need in the remaining time. It will then be easier to choose among the many possible investment methods. Autonomous management of investments can make sense at this time, as it offers a lot of flexibility and control over the evolution of the portfolio over time, depending on individual risk tolerance.

Remember, retirement may seem like a long way off, but it may last more than 20 years… You’ll be happy to have prepared yourself to make the most of it without financial worries.


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