In 2023, people are living longer and retiring earlier. Whether you have recently left the workforce or have decades to go, ensuring you have enough money to last through your retirement is a key part of planning your financial future. Many retirement planners suggest replacing at least 70 to 85 percent of your pre-retirement annual income, but there’s more to consider than that.
Determine Your Savings
Life is full of unexpected events, and everyone’s retirement situation is different. While you may not be able to calculate how long your retirement savings will last to the exact dollar, there are several factors you can consider that will give you a rough estimate:
- Age you retire: If you retire early, you will need more money saved and should take extra measures to ensure your retirement savings last. You should keep in mind that you can’t start collecting social security until age 62, and can only maximize benefits at age 70 or older.
- Employer-sponsored savings: The amount you have contributed to either a 401(k) or Individual Retirement Account (IRA) is an important factor in determining how long your savings will last, along with when you begin withdrawing from these accounts.
- Investment portfolio: Having a diversified investment portfolio can help grow your wealth in retirement. Whether you have a more aggressive or passive investment style, the way you invest your money is a key factor in figuring out how much money you will have post-retirement.
- Expenses: From health insurance to travel expenses, identify where you are spending your money each month in order to help calculate your investment.
One resource that can help you determine your projected retirement savings is the online Emerj360 retirement calculator. Using your current income, years to retirement, current retirement savings and contributions, and your investment style, the online calculator will estimate how much you will have each month during your retirement. This quick and easy tool will make it easier to determine your projected wealth, and help you plan accordingly.
If you have estimated the amount of time your savings will last, and are unhappy with the results, it’s never too late to make the changes necessary for your savings to last longer.
Maximize Your Retirement Savings
Stay Organized
When you first leave the workforce, it can be difficult to fall into a new routine—especially when it comes to your finances. You are likely used to being paid on a weekly or bi-weekly basis through your paycheck, and then spending that money accordingly. Now, you are in control of when and how you receive your money from your retirement savings.
To prevent overspending or even underspending, it’s important to create a budget and a plan for how you will withdraw and manage your finances. When doing this, keep in mind your end goals—both monetary and personal. For example, if your goal is to buy a new home or to take a long vacation, that should help inform how much of your savings you are using.
Determine a Withdrawal Strategy to Follow
One mistake retirees can make is withdrawing too much money from their savings account too soon. A common rule of thumb that many financial professionals follow is the 4% rule. This strategy involves withdrawing 4% of your savings each year of retirement, and adjusting for inflation as needed. If the market does well and your returns increase, you can increase your withdrawal percentage to reflect that growth.
No matter what approach you choose, having a strategy for your withdrawal will help you stay consistent and organized in the way you are spending and saving your money. You should regularly evaluate your personal finances to make sure you are on the right track to maintain your savings longevity.
Invest During Retirement
Even when you have reached retirement, it is still important to continue focusing on growing your wealth. Your investment priorities may be different than when you were in the workforce.
On one hand, losses on investments might make a larger impact because you no longer have the same steady income, and you have less time for your investments to recover. On the other hand, the greater the investment risk, the greater your potential return will be. Evaluate your current financial standing or consult a financial professional that can help you determine your risk tolerance and your next steps forward.
Work with the Professionals
Planning your retirement savings strategy does not need to be a task you do alone. At Emerj360, our experienced professionals offer a variety of financial services, including retirement planning. Our goal is to help give you the peace of mind to retire comfortably by creating a customized retirement plan and providing investment guidance to help grow your wealth. You can schedule an appointment online to get started on your retirement journey.
