How much money do you need to have saved to retire comfortably? The standard rule is 80-85% of your pre-retirement income. But recent research calls this percentage into question.
An article in Money Talks News summarized the research. It points out that people already live on less than 80-85% of their gross income. For example, you contribute 7.65% to Social Security and Medicare (15.3 if you are self-employed) and, hopefully, are setting aside 15% for retirement. So right there you are living on 77%. But the actual percentage you need may be closer to 60%.
Granted, while some expenses, like health expenses, increase, what you spend on other categories decrease. For example, Social Security is taxed at a lower rate and you won’t have work related commuting expenses.
In the end, they conclude:
What we really need to do is maintain our standard of living in retirement. This means figuring out what we spend before retirement, how much of that spending we want to maintain, covering unknown risks of long-term care and any bequest needs, and then figuring out how much we need in savings to close the gap.
What it boils down to is how much of your lifestyle you want to keep in retirement.
For the full article from Money Talks News, click here.
For the full research article, click here.