By: John Glover (MBA)

Planning for retirement can be a daunting task, especially for Baby Boomers and Generation X who are rapidly approaching their retirement years. Alarmingly, 81% of households do not know how much money they need to have saved when that time of their lives approaches. Understanding the costs and planning accordingly are crucial steps to ensure financial security in your later years.

The Importance of Knowing Your Retirement Target

“For Gen Xers and Boomers, it’s critical to understand how much you need for retirement, as the window to save and protect your assets is closing,” explains Michael A. Scarpati, CEO of RetireUS. “Without a clear target, gauging whether you’re saving adequately or exposing yourself to undue risk becomes a challenge. As retirement approaches, the focus shifts towards maintaining pace and safeguarding what you’ve already amassed. Knowing the amount you need enables you to manage risks smartly, protecting your portfolio from unnecessary market turbulence.”

The lack of understanding about retirement savings can lead to significant financial stress. Many people underestimate the amount they will need to maintain their current lifestyle or cover unexpected expenses, such as healthcare costs. This gap in knowledge is often due to insufficient financial education and the complexity of retirement planning.

Estimating Retirement Costs

To begin estimating how much you need for retirement, consider your current expenses and lifestyle. Most financial advisors suggest that you will need about 70-80% of your pre-retirement income to maintain your standard of living. This includes housing, food, transportation, healthcare, and leisure activities.

Healthcare, in particular, can be a major expense. According to Fidelity, an average retired couple aged 65 in 2020 may need approximately $295,000 saved (after taxes) to cover healthcare expenses in retirement. This figure can vary based on health, location, and longevity, but it underscores the importance of planning for medical costs.

The Role of Financial Advisors

Navigating the complexities of retirement planning can be overwhelming, which is why seeking professional help is beneficial. “Working with a financial advisor is essential; they assist in pinpointing your exact financial needs and crafting strategies to shield your investments from market fluctuations,” Scarpati emphasizes. Financial advisors can help you develop a comprehensive retirement plan that includes:

• Assessing Current Financial Status: Evaluating your assets, debts, income, and expenses to understand your financial baseline.
• Setting Retirement Goals: Defining what you want your retirement to look like, including lifestyle choices and potential travel plans.
• Creating a Savings Plan: Determining how much you need to save monthly or annually to reach your retirement goals.
• Investing Wisely: Advising on investment strategies that balance risk and return, ensuring your money grows over time.
• Adjusting Plans as Needed: Regularly reviewing and adjusting your retirement plan to accommodate life changes and market conditions.

Protecting Your Retirement Savings

One of the biggest risks in retirement planning is market volatility. As you near retirement, it’s crucial to shift from growth-oriented investments to more stable, income-producing assets. This transition helps protect your savings from sudden market downturns that could significantly impact your retirement funds.

Additionally, consider diversifying your retirement income sources. This might include a mix of Social Security benefits, pensions, annuities, and withdrawals from retirement accounts like 401(k)s and IRAs. Diversification can provide a more stable and reliable income stream during retirement.

The Benefits of Starting Early

While this advice is crucial for Boomers and Gen Xers, it’s also important for younger generations. Starting retirement planning early allows more time for your investments to grow through compound interest. Even small contributions made consistently over time can lead to significant savings by retirement age.

Retirement planning is a complex but essential task that requires careful consideration and proactive management. Platforms like RetireUS offer valuable resources and guidance, making it easier for individuals to navigate their financial futures confidently.

By understanding your retirement needs, working with financial advisors, and taking proactive steps to protect and grow your savings, you can ensure a financially secure and fulfilling retirement. Don’t leave your future to chance—start planning today to enjoy your golden years without financial worries.

Financial Disclaimer: This content is for informational purposes only and is not intended as financial advice, nor does it replace professional  financial advice, investment advice, or any other type of advice. You should seek the advice of a qualified financial advisor or other professional before making any financial decisions.

Published By: Aize Perez