Choosing A Retirement Solution

Establishing Your Goals

Before you can determine how much money you'll need to live securely in retirement, you should first ask yourself just what your dreams and wishes are.

For example, the nest egg you'd need if you plan to work past the age of 65 would be smaller than it might be if you'd like to retire early and travel the world. Once you've gotten a clearer picture of just what your dreams are, you can then move on to estimating how much you'll need to save.

Professional financial planners and investment firms can be a big help in determining how large your retirement savings would need to be, as well as certain software programs and books. But, to get you started, there are some basics questions you'll need to answer.

  • How much income will I need? Obviously, there is no definite answer. For a simple guideline, estimate that you'll need 70 to 90% of your current income to maintain your lifestyle when you retire. Of course, those figures are only a general estimate and may not be accurate for you. Expenses usually go down after you retire, but they may not go down significantly if you still have a mortgage, college loans or other substantial financial obligations. Additionally, the cost of living in the area where you plan to retire can also make a big difference.

  • How long will I live in retirement? Basically, the news is good. Based on current statistics and expert opinions, more and more of us can expect to live longer in retirement than ever before. In fact, the U.S. Department of Labor estimates that a man retiring at age 65 today can expect to live approximately 16 years in retirement, while a female retiring at the same age can estimate living an additional 19 years.

  • What sources of income will I have? Social Security may be one source of retirement income. If you haven't already received a statement or haven't gotten one recently, you can receive an estimated statement of your benefits from Social Security by calling 1-800-772-1213 or visiting and requesting your Social Security Statement. You may also have a pension or benefits from an employer sponsored retirement plan, as well as income from other investments or savings.

  • What savings do I already have for retirement? Think about the retirement savings you have already. Typically, this retirement nest egg comes from a mix of employer-sponsored retirement plans, IRAs, annuities, and personal savings.

  • What adjustments should I make for inflation? Unfortunately, there's no simple answer. To check the current rate of inflation, simply visit and refer to the latest year-end inflation rate. But, as we all know, inflation can change dramatically over time. When planning for retirement, it's always a good idea to estimate a higher, rather than a lower, rate of inflation. Incidentally, Social Security benefits are adjusted to compensate for inflation.

  • What will my investments return? Again, there are no simple answers, but it's important to be realistic when estimating your returns. Most financial planners recommend that you consider the historical rates of return based on the types of investments you choose when calculating your estimates.

  • How many years do I have left until I retire? The more years you have, the less you'll need to save each month to reach your goal. Additionally, the time you have until retirement may also affect the investment strategy you choose to take. If you have more time before you retire, you may feel comfortable taking on more aggressive investment choices in exchange for the chance to earn higher returns.

  • How much should I save each month? That figure should be based on the number of years you have until you retire and the size of the nest egg you want to build.

  • Now that you've established your goals and have a general idea of how much you'll need, you're ready to set up a plan that can help you enjoy the secure retirement you deserve.

Learn About Creating A Savings Plan For Retirement...