Preparing for retirement is not easy, but if you enter your new life phase with eyes wide open, you’re more likely to enjoy a long and happy retirement.ġU.S. The 401(k) catch-up amount is $6,000, for a total employee contribution limit of $24,000. In 2016, the IRA catch-up amount is $1,000, for a total contribution limit of $6,500. You might take advantage of catch-up contributions to IRAs and 401(k) plans, which are available to those who reach age 50 or older by the end of the calendar year. If it’s not, or your anticipated expenses exceed your income even without a trial run, you may have to reduce expenses or work longer, or both.Įven if the numbers look good, it would be wise to keep building your savings. If retirement is approaching soon, try living for six months or more on your anticipated income to determine whether it is realistic. Your projected income and expenses should provide a rough picture of your financial situation in retirement. One study suggests that a 65-year-old couple who retired in 2015 would need $259,000 over their lifetimes to cover Medicare premiums and out-of-pocket health-care expenses, assuming they had only median drug expenses. Don’t forget to factor in a reserve for medical expenses. If you’ve paid off your mortgage and other debt, you may be in a stronger position. You might use 3% or 3.5% in your calculations. Keep in mind that some experts believe a 4% withdrawal rate may be too high to maintain funds over a long retirement. At that rate, the $104,000 median savings described earlier would generate $4,160 per year or $347 per month (assuming no market gains or losses). One simple rule of thumb is to withdraw 4% of your savings each year. It’s more difficult to estimate the amount of income you can expect from your savings this may depend on unpredictable market returns and the length of time you need your savings to last. Add other sources of income, such as a part-time job, if that is in your plans. If you expect a pension, estimate that monthly amount as well. The longer you wait to claim your benefits, from age 62 up to age 70, the higher your monthly benefit will be. You can estimate your monthly Social Security benefit at ssa.gov. You might add details once you get the basics down on paper. As a starting point, create a simple retirement planning worksheet. How can you transition into a happy retirement even if your savings fall short of your goals? The answer may lie in developing a realistic picture of what your retirement will look like, based on your expected resources and expenses. Even a healthy savings account may not provide as much income as you would like over a long retirement.ĭespite the challenges, about 56% of current retirees say they are very satisfied with retirement, and 34% say they are moderately satisfied. Your own savings may be more substantial, but in general Americans struggle to meet their savings goals. Among households in this age group with savings, the median amount was just $104,000. Mortgage comparison: 15 years vs.A 2015 study found that 41% of households headed by someone aged 55 to 64 had no retirement savings, and only about a third of them had a traditional pension.Consolidation Loan Investment Calculator.Business Valuation - Discounted Cash Flow.Beneficiary Required Minimum Distributions.We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues. All examples are hypothetical and are for illustrative purposes. ![]() ![]() We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. ![]() ![]() The American Institute of Certified Public Accountants
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