Many financial experts advise that you'll need between 60% and 100% of your final working year’s salary when you retire. Given the rising cost of living, this means you need to plan on an annual retirement income that will likely be substantially higher than what you earn now.
Figuring out exactly how much to plan for in retirement and how much you need to save today first requires making estimates of expenses. You may have higher expenses in some things, such as medical care, but lower expenses in others. You can estimate your "personal inflation rate" by looking at your expected living costs in retirement.
Retirement income may be made up of pension benefits, Social Security benefits, personal savings and investments, and income from part-time work. On average, Social Security and pensions only provide a little over half of what you’ll need. The rest you’ll have to provide yourself. By investing now with a long-term focus, you can greatly improve your chances of filling this gap. The worksheet in the accompanying article can help you estimate what your savings and investing will be. Your financial professional can help you refine this estimate and assist you in setting up a retirement fund to provide the income you’ll need.
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