Finding a way to live decades in retirement without worrying about running out of money can seem like an overwhelming task. There is no “one size fits all” plan that everyone can follow. There isn’t a specific dollar amount we can all strive towards, as everyone’s retirement model is unique and more complex than a generic plan can offer. However, there are a few common goals we can aim to accomplish.

Goal #1: Saving $1 million. This will provide about a $40,000 per year income over the span of 30 years, assuming a moderate rate of return. Depending on where you live and what activities you plan for your retirement, a goal of a million dollars may or may not actually meet your needs. While it seems like a large amount, remember that you need it to last for the entirety of your retirement. In some states, the cost of living is so high that $1 million won’t even sustain you for 20 years into your retirement. In fact, retirees in a high cost of living state such as New York can expect that a million dollars would only last about 17 years.

Keep in mind that you will still have Social Security to tap into, but that amount will likely not make up the difference you need to live the retirement lifestyle you imagined, vacation or continue paying your mortgage.

Goal #2: Replacing 70% to 80% of pre-retirement income. Income replacement rates refer to the percentage of your pre-retirement income you would need to replace a similar standard of living once you retire. The general rule of thumb is that most people will need 70% to 80%, but this is not always an accurate assessment, since it assumes that your expenses will decrease after retirement. In truth, many people find that their expenses increase.

Retirees are no longer contributing to a retirement plan or commuting to work so you would assume their expenses would decrease. However, more so than not, retirees are signing up for classes and outings, going on vacations and often financially contribute to their children and grandchildren’s lives and education. Many of the things you’ve dreamt of doing once you retire all cost money, and that is why those looking forward to an active retirement should try to get to a replacement rate closer to 100% of their pre-retirement income.

Goal #3: Saving 10% to 15% of your current income. If you start saving 10% of your income at age 25, you could retire at age 65 with about a 70% replacement rate. Most twenty-somethings now are struggling with a high amount of student loan debt, so it can be difficult for them to put that 10% toward retirement instead of paying down loans. But consider this – if you wait until later to start saving for retirement, the squeeze on your paycheck will be much tighter. A 45-year old who wants to retire at 65 with a 70% replacement rate will need to save more than 25% of their income to reach that mark. The majority of people that age have a mortgage and family to provide for, so aggressive saving is often not realistic.

The younger you start, the easier it is – both in regards to the percentage you need to put away and in developing a habit of saving for your future. A 10% to 15% saving target will lay down a solid foundation that will set you up for growth and success later on.

Goal #4: Customize a retirement plan that works for you. Just as your retirement goals must take into consideration the state in which you plan to reside in and the activities you want to pursue, it must also be designed to take into account your standard of living; how many times a week you will go out to dinner? what type of home will you live in? and what are your hobbies or interests? It will also need to include any funds you want to set aside for your children’s inheritance or a charity, or funds set aside for emergencies or health related matters you or your spouse may face.

Many of us have common retirement goals like traveling or taking up a new hobby, but those are just a starting point for the bigger picture. You will need to get into the nitty-gritty details to understand what is achievable and how much you are willing to risk to get there. If you have the ability to participate in an employer sponsored retirement plan such as a SIMPLE IRA or 401(k) take advantage. If your employer does not offer one ask them why and ask them to speak to a professional to explore establishing one as a benefit to all working there. If you do not have access to an employer sponsored retirement plan, research establishing a ROTH or Traditional IRA. Self-employed individuals may have other retirement savings options such as a SEP IRA or Individual 401(k).

As with any financial plan, it is important to speak with a professional who can help you think ahead and mitigate risk. A well-rounded retirement plan, that protects you from the ups and downs of the financial markets and unforeseen circumstances, needs to be crafted and customized with you and your family’s best interests in mind.

The above is for informational purposes only. It should not be considered legal or financial advice. You should consult with a professional to determine what may be best for your individual needs. Bernard Herold & Co., Inc. does not make any guarantee or other promise as to any results that may be obtained from using our opinions. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence. To the maximum extent permitted by law, Bernard Herold & Co., Inc. disclaims any and all liability in the event any information, commentary, analysis, opinions, advice and/or recommendations prove to be inaccurate, incomplete or unreliable, or result in any investment or other losses.

Mario J. Giammarco Jr., J.D./M.B.A – Financial Advisor – Bernard Herold & Co., Inc.

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