Do you have any idea when will your retirement run out? Most people with a retirement account probably cannot give a definite answer. Part of planning for retirement is calculating how long you can comfortably survive based on your retirement savings. As you get closer to retirement you will want to determine when (or if) your money will run out. It’s a scary thought, but you don’t want to be left without a means to support yourself in your golden years.

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Life expectancy is on the rise every year. Medical and technological improvements allow people to live longer lives. The Social Security Administration estimates that males who are 65 have an average life expectancy of 84 years. Women aged 65 have a similar life expectancy of 86 years. That means if your retirement funds are collected today at the age of 65, it will need to last for around 20 years. In 10, 20, and 30 years from now, life expectancy is only going to increase, and that means more years of financial support could be required.

Here is what you can do to prepare for this situation.

How to plan

The first step to consider when planning for retirement is to calculate how much money you think you’ll need to live off of every year. Take into account expenses such as a monthly mortgage, utilities, transportation, travel, food and emergencies.

How much do you currently spend? Do you plan on paying off your home before retirement? If not, how many years after you retire do you think it will be paid off?

Calculate the amount of money you spend on bills and other expenses every month, then determine the amount for the whole year. Multiply that number by at least 20 years and you should have an idea of the minimum amount you’ll need in order to retire. For example, let’s say you have a total of $2,000 a month in expenses. In one year you’re going to need at least $24,000. That means you’re going to need roughly $480,000 saved for 20 years worth of retirement. A 30-year retirement would require $720,000, while a 40-year retirement needs a grand total of $960,000.

Also, remember to calculate taxes into the equation. For example, Roth IRA contributions are not taxed at the time you contribute funds, but your contributions come from post-tax income. You pay taxes on your income today, but not in the future. Conversely, a traditional IRA allows individuals to direct pretax income, up to specific annual limits, toward investments that can grow tax-deferred (no capital gains or dividend income is taxed).

Check with the IRS or conduct your own research to learn more about taxes associated with your particular retirement account. Also, be aware of unexpected changes that could affect your retirement. Another recession could hit and you may have to tap into your retirement earlier than expected. For all you know, the government could pass a policy change that could directly affect your retirement funds.

What if you live longer than 20 years after retirement? Considering one out of four people are expected to live past the age of 90, someone who lives 30 years after retirement should not only know how to appropriately manage his/her funds, but should also be conscious of how much is left. Think about setting up a meeting with a financial advisor to learn how much money you need to start contributing every month. Learn what types of investments will help you achieve your goal. Stocks, bonds, and other investments are constantly changing, and it can be intimidating or time consuming to keep up with the market. An advisor can help guide you to make smart investment decisions.

Plan to pay off debt

A smart way to approach retirement is to pay off as much debt as possible. A small balance on credit cards is nothing serious to worry about, however, heftier debt should be paid off as fast as possible. Try your best to pay off the mortgage on your home, any vehicle loans, and other big balances. Having little to no debt during retirement can help you live comfortably without many financial obligations to be concerned about.

Why a separate savings is smart

What if you acquire a medical condition or disaster strikes your home and you need more money than what your retirement provides? Or what if you do not get what was expected from your retirement account? A separate savings that can pay for the cost of living for at least one year is a smart idea to avoid setbacks during retirement.


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  • Angelo_Frank

    “Calculate the amount of money you spend on bills and other expenses
    every month, then determine the amount for the whole year. Multiply that
    number by at least 20 years and you should have an idea of the minimum
    amount you’ll need in order to retire.”

    Why no mention of the impact of inflation in this calculation?

  • SkySailor

    There are several options available when reaching retirement including downsizing, living frugally, moving overseas and more, all to reduce your costs. There are some great posts on these topics on the retirement site Retirement And Good Living. There is also information on that site on many other retirement related issues.