Can You Afford to Retire? Tools to Help You Decide

by Bill Ness on April 6, 2012

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Retirement planning can be easier than ever with help from valuable online calculators and articles.

According to Money Magazine, an adult who wants to retire in their 50s or early 60s would need 10 to 16 times their salary saved by the time they stop working. Of course, suggestions like this are only a rule of thumb and not a strict guideline for a successful retirement. Plans for your own retirement will vary widely depending on the specifics of your situation.

When planning your retirement, there are many factors to consider. You have to look at your savings, your expected retirement expenses and your potential retirement income. Will you be drawing from a pension or retirement savings plan? When will you begin receiving Social Security benefits? Do you expect to have major expenses, such as travel plans, a vacation home or your children’s college tuition?

Looking at your current income may be a good place to start, but it doesn’t necessarily reflect how much money you will need to live comfortably during your retirement years. You may be able to live on much less if you plan to downsize your home or move to a more affordable area. When figuring out your retirement goals, don’t forget to include expenses like travel or other hobbies. You should also pad in savings toward accidents and unexpected medical expenses.

There are online calculators you can use to help you decide how much money you will need to save before you can retire. Here is one online calculator from Money Magazine designed to answer the question: How much you will need for retirement? This calculator primarily looks at your current age and income, your retirement goals and your life expectancy.

That last item, life expectancy, is one of the most difficult aspects of planning for your retirement. Most people do not like to think about how long they will live, but it is an important part of your plans if you don’t want to outlive your retirement savings.

The Social Security Administration has a Life Expectancy Calculator to help you estimate your years in retirement. Other online life expectancy calculators (like this one from the University of Pennsylvania) add general health and medical history questions to try to give you a more accurate answer. However, these will always be estimates, and it’s best to plan to live longer than you expect.

If you estimate your retirement goals and find that you don’t have enough money saved to retire, you can also use online calculators to help you reach your goals. Money Magazine has two useful calculators to try called What you need to save and How fast will your savings grow?

Like the life expectancy calculators, these retirement calculators make projections based on estimates. They can be helpful in planning, but they don’t offer any guarantees. Another option which may help you get a more specific understanding of your own situation is to meet with a professional financial consultant.

It’s never too early to begin planning your retirement. Online calculators can help you understand the factors which affect your savings, and a professional financial consultant can give you personalized advice toward meeting your retirement goals.

{ 1 comment… read it below or add one }

Bill Pearson April 6, 2012 at 11:57 am

Great article Bill and the one thing that helped me better grasp the whole retirement concept was getting my hands, mind and body into it. I know, sounds strange so let me elaborate.

We were fortunate, we both (my wife and i) had good jobs with defined benefit plans. Our goal was to retire as early as possible. As we searched for the “perfect” place to retire, we saw amazing places, many that would hit us hard if we wanted to stay active, involved and doing as much as we could (afford).

Money is always an issue in retirement, so finding the best value was high on our list. No surprise there, value was number 1 or 2 on the Del Webb Sun City 2010 boomer survey. The oddity is that if you go back to the very beginning of the opening of the original Sun City outside of Phoenix AZ, value was key to its success in the 60’s and 70’s.

Simply put, over the past 50 plus years, it’s still about getting the most bang for your retirement dollar. As we searched, we used that as our benchmark; we looked for the most amenities at the least cost. When we came across Sun City we knew we found “home.” It wasn’ the newest or most glitsy by any means, but it was easily the most comfortable (and most affordable).

Now to getting immersed in the process: We bought at 51, knowing we couldn’t come for years. We rented it out and remodeled as we went. One of the primary factors in affording retirement is the question of owning and maintaining one home or two. Our goal was to have one place and that meant down sizing our primary residence in Minnesota and shifting to prepare for the future.

Awesome. Every vacation was spent in Sun City, longing for that day we could move. We are always told to live in the here and now, but tasting the “good life” in little bites just made us hungrier for more. Perhaps was the fact we knew exactly what we wanted that made it so easy. Knowing we could afford it made it better.

By all means do the calculations; math matters. More importantly, know how you want to live and the differences in “high end” retirement communities than those that are more “value” driven. I think you’ll be astounded how much you can get when you’re not reaching for the moon but grounded in reality. You don’t have to sacrifice quality and quanity if you do your homework and try before you buy.

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