What Can I Use to Determine if I Have Enough Money for Retirement?
Original post by Maggie McCormick of Demand Media
Retirement costs can vary widely depending on the area and the type of lifestyle you're used to living. Although your costs in retirement may go down, your income may go down as well. Whether you are looking to retire early, or just want to make plans for the future, it's important to look at all the angles to determine if you'll have enough money for retirement.
Many top financial websites offer retirement calculators. This will take data that you input, including your current salary and savings, to determine how much money you should be saving for retirement. Using this estimate, you can see if you have enough to retire now.
Social Security Statement
Many retirees rely on the Social Security checks to get by. The amount that you'll receive is based on how much you paid into the system. You'll typically receive a yearly statement that indicates how much you should expect, but you can also use the estimator at the Social Security website to calculate this amount. With this figure, you can estimate whether you'll be able to get by on this amount alone, or if you have enough money to supplement the earnings you receive from Social Security.
To accurately estimate how much money you'll need in retirement, it's smart to know how much money you're spending right now. A budgeting software program can show you how much money you're spending in categories like housing, utilities and transportation. However, when you retire, costs like commuting costs will go down, while other costs like utilities may go up.
State Tax Guides
Taxes can vary from state to state, which can have a big impact on how much money you'll need for retirement. For example, some states tax the money that you receive from your retirement funds, while others allow you to exempt some, or all, of this income. It's especially important to look at the state tax guides if you'll be moving to a new state after you retire, as the laws may be much different from what you're used to.
- Charles Schwab; How Much Should You Save for Retirement? Play the Percentages; Rande Spiegelman; March 2005
- Social Security Administration: Retirement Estimator
- Retirement Living Information Center: Taxes by State
- MSN Money: Am I Saving Enough for Retirement
About the Author
Maggie McCormick is a freelance writer. She lived in Japan for three years teaching preschool to young children and currently lives in Honolulu with her family. She received a B.A. in women's studies from Wellesley College.