How Much Do I Need to Have Saved to Retire?

The question of retirement savings is a common concern among many individuals, especially those approaching the end of their working years. Realtors®, in particular, frequently ask about the magic number needed to retire with confidence. The truth is, there is no one-size-fits-all answer to this question. The amount required to retire comfortably depends on various factors that can significantly impact your financial standing. To get a better grasp of your unique situation, you need to consider several crucial variables such as living expenses, debt, and passive income. Building a solid financial plan is the key to understanding the amount you need to save for retirement planning and ensuring a smooth transition to your golden years.

Factors Affecting Your Retirement Savings “Number”

Living Expenses and Budgeting 

One of the primary determinants of how much you need to retire is your projected living expenses during retirement. Assessing your current budget and understanding how it will change post-retirement is essential. Consider factors such as housing costs, healthcare expenses, leisure activities, and other necessities to estimate your future living expenses accurately.

Debt Management and Reduction

Your outstanding debts play a significant role in shaping your retirement savings goal. Paying off debts before retirement can relieve you of financial burdens and ensure a more secure financial foundation. Evaluate your debt repayment strategy and try to reduce your debt load as much as possible before retiring.

Spouse’s Pension and Dual Retirement Planning

If your spouse has a pension or other retirement benefits, it can impact your combined financial situation significantly. Dual retirement planning requires coordinating both partners’ retirement goals and considering how their retirement incomes will complement each other.

Income Property and Passive Income

Investments in income properties can serve as a valuable source of passive income during retirement. Assess the potential income from your real estate holdings and other investments, as they can make a substantial difference in your retirement finances.

Desired Retirement Age and Phased Retirement

Your target retirement age and whether you plan for a gradual transition into retirement (phased retirement) can affect the amount you need to save. Early retirement may necessitate a larger savings cushion, while phased retirement can help reduce the financial strain during the transition.

Depending on where you stand with each factor above, your “number” required to retire with confidence can vary dramatically.

So, while some general rules of thumb may be able to get you pre-qualified for retirement, here are the steps you can take with your financial plan to get fully pre-approved.

Steps to Get Fully Pre-Approved for Retirement

Get Organized

The first step to get organized is gathering your financial data. Starting your financial planning journey may seem daunting, but it begins with organizing your financial data. Collect essential documents such as your most recent tax returns, both personal and business, mortgage statements, real estate holdings estimated values, estate planning documents, insurance policies, investment account statements, retirement account statements, and pension estimates. The accuracy of this data directly impacts the reliability of your retirement savings calculations. Here is a list of data that will help you get organized: 

• Most recent tax return (personal and business)
• Mortgage statements
• Real estate holdings estimated values
• Estate planning documents
• Insurance policies
• Investment account statements
• Retirement account statements
• Pension estimates

Make a Comprehensive Financial Plan 

Your financial plan should be a comprehensive reflection of both your current financial situation and your future goals. Merge your financial data with your personal objectives to establish a roadmap for your financial journey. Assess forward-looking actions such as fully funding your emergency fund, evaluating your savings rate, accelerating debt repayment, ensuring adequate insurance coverage, determining your annual cash flow, having estate planning documents in place, and estimating your Social Security income.

Regularly Reviewing and Adjusting the Financial Plan

Life is fluid, and so should be your financial plan. Avoid treating your retirement plan as a one-time task. Regularly reviewing your financial plan, at least semiannually, is highly recommended. Changes in circumstances and life events call for adjustments to your plan. Consider factors like primary home relocation, fluctuations in income or expenses, updates to legacy planning, changes in state and federal tax codes, varying insurance needs, evolving interests and hobbies, real estate transactions, and business purchases and sales.

Building Your Retirement Pre-Approval Letter

Seek Professional Guidance 

While you can embark on your retirement planning journey alone, seeking guidance from a Certified Financial Planner™ (CFP®) professional can offer invaluable expertise and peace of mind. A CFP® professional can help you navigate through the complexities of financial planning, offering personalized insights tailored to your specific situation.

Meet with a CFP® Professional

Schedule a meeting with a CFP® professional to initiate the financial planning process. During this meeting, discuss your financial goals, present your organized financial data, and express your concerns and aspirations. The CFP® professional will analyze your information, craft a personalized financial plan, and provide recommendations to help you achieve your retirement objectives.

Start the Financial Planning Process 

With the guidance of your CFP® professional, embark on the financial planning process to build out your retirement pre-approval letter. This step-by-step approach ensures that you have a comprehensive understanding of your retirement savings goals and a clear path to confidently retire when the time comes.

The road to retirement is filled with questions, uncertainties, and variables unique to each individual. Understanding how living expenses, debts, pension benefits, income properties, and retirement age affect your retirement savings “number” is crucial. With a well-organized financial plan and regular evaluations, you can adapt to life’s changes while staying on track toward a comfortable retirement. Seek the assistance of a professional to make the most informed decisions, empowering you to embrace your golden years with confidence and financial security.

If you’re looking for a CFP®, someone from our team would love to connect with you. Schedule an insight meeting today to begin the financial planning process.