Many people wonder how much money they’ll need to have in order to retire comfortably. Unfortunately, there isn’t a magic number because there are so many different factors that must be taken into account. One of the sad truths about retirement is that you never know how long it is going to last. You can plan for when it is going to start, and you can estimate your life expectancy based on average lifespan and family history, but you have no real way of determining how long your retirement will be. So, the question then arises: how do you avoid running out of money during retirement?
The first thing to realize is that it’s never too late and it’s never too early to protect your future.
If you qualify for Social Security, you’ll never completely run out of money (unless Washington manages to drain the program). However, lowering your standard of living to what you can get from Social Security isn’t an appealing idea for most people. Saving for your retirement and planning through your retirement can help you maintain your standard of living.
Still, there are a lot of factors that you will need to consider when planning for your retirement in order to live comfortably through your retirement. You must account for taxes, spending, and inflation at the very least. Let’s take a closer look at how those factors affect your retirement savings.
Accounting for Taxes
Many people get an amount in their head that they want to have saved when they retire, but they forget to account for taxes. In order to avoid running out of money during your retirement, you’ll either need to save enough to cover the taxes that will apply to your savings or learn how to build a tax-free retirement plan.
Accounting for Spending
Your standard of living is generally about how much you spend. Finding ways to decrease your spending in retirement without decreasing your standard of living is the trick. One of the best ways to do this is to go into retirement debt-free and owning your house outright. If you can accomplish this, the equity in your home can also be used in extreme emergencies if needed.
Accounting for Inflation
Inflation averages about 3% per year, but health care costs can sometimes have a higher rate of inflation that you should also be aware of. You’ll also want to remember that the older you get, the more likely you are to need additional medical care on top of medical cost inflation.
Chuck Oliver, the creator of The Hidden Wealth System, wants to help you live comfortably in your retirement. The Hidden Wealth System is designed to educate our clients on how to increase their retirement income with little or no tax and with no market risk and and learn how to establish a tax-advantaged income for the rest of their lives. Contact us today to learn more.