Everyone knows the importance of saving for retirement. But with all the talk about how important retirement saving is, no one talks about how much you should save.
Retirement is different for everyone. Everyone has their own wants and needs, which means that you may need to save less or more than the next person.
Here’s what you need to know about determining a good retirement income in 2021.
Average Income for Retirees
Most people over the age of 65 receive Social Security benefits. In fact, according to the Social Security Administration (SSA), these benefits make up a third of income for the elderly population.
In 2021, retired workers receive an average of $1,543 monthly. This amount is designed to supplement your retirement income from 401(k)s, IRAs, and other retirement accounts.
On its own, SS won’t provide a livable wage. With the cost of living expected to continue to increase, it’s crucial to have other retirement income for financial stability.
For those with dependents or medical concerns, the cost of living is even higher.
Calculating Your Retirement Income
There are several factors to consider when calculating your retirement income.
Life expectancy
No one knows how long they will live. However, according to the SSA, men can expect to live around 18.1 years after hitting age 65. Women live around 20.6 years more after hitting retirement age.
But these are just average numbers. Review your health and your family’s health history. When planning for your retirement, choose a generous age. This way you have a financial cushion.
Consider your retirement lifestyle
You should have a goal for how you want to enjoy your retirement years. Do you want to live the same lifestyle as you’re living now? Do you want to downgrade or live more luxuriously?
Whatever your goal may be, your financial retirement plan must reasonably fit your wants and needs.
Since it can be hard to predict how much you’ll need decades from now, use the 80% guideline. You’ll need at least 80% of your pre-retirement income to financially support yourself. This is lower than your current income because you’ll have less expenses.
Consider investment savings
If you’re still making investments after you retire, you’ll want to factor these in as well. Of course, it’s hard to predict how much your savings will earn in the future. but you can look at long-term historical returns to get a good idea.
At the end of the day, your rate of return depends on how much money is in your retirement plan and the type of plan you have.
Final thoughts
There’s no one answer for what a good retirement income is in 2021 and beyond. What’s most important is that you plan early and have a good idea of what you want your retirement years to be like.
The earlier you start saving, the better off you’ll be in the future.
