Planning for retirement can be tough, especially since there are so many unknowns. Inflation and health care expenses are two big considerations that no one can know in advance.
But another big question mark when it comes to retirement is longevity. Some people live longer than others. And there is an enormous difference between age 60 and age 90. For some, that difference in time could mean millions of dollars.
Here’s how to estimate how much time you’ll need to plan for, even if you don’t know the future!
Read more: How much money do I need to retire?
How to estimate your life expectancy
Though it is impossible to know what the future holds, a tool developed by the American Academy of Actuaries and the Society of Actuaries can give you a good estimate of how long you’ll live by asking you to enter a few simple details about yourself. The tool then produces probabilities of how likely it would be for you (and a spouse, say) to live to a certain age. Tools like this can help you plan better for the future and help you ensure you’ll have enough money in retirement.
To start, enter your name, date of birth, age for illustration to start and some other details about yourself. You don’t have to, but you could also include a spouse or significant other’s info.
Once you view your results, you will see the probability of living to a certain age. Then, you can view the charts to see what they can tell you.
You’ll want to keep in mind however that these charts are only estimates, but, using statistics and real-life data,they provide fairly a good guess.
How much to save for retirement
Then the tricky part comes in: How much should I save for retirement? Though answers vary slightly from one financial institution to another, Clark recommends to save a dime of every dollar you make. But, if you’re late to the retirement saving game and you need to play catch-up, the answer is a little more tricky.
Several years back, The Baltimore Sun crunched the numbers and recommended the following to have a comfortable retirement.
- If you start saving at 35, you need to save 20 cents out of every dollar.
- If you start saving at 45, you need to save 30 cents out of every dollar.
- If you start saving at 55, you need to save 43 cents out of every dollar.
As you can see, the older we get, the harder it becomes to save what we’ll need in retirement. That’s why the sooner you can save, the better!
If you want to get a better idea of an overall number to shoot for when it comes to retirement, the following calculators can help. Try a couple to see how they compare!
Though financial advisors caution savers about using benchmarks, calculators and charts as concrete tools for retirement savings, they can help you begin to think about retirement and ask the question, ‘Am I headed in the right direction?’ which is always a good thing.
But, if you’re saving nothing now, start with just 1 cent of every dollar you’re making, and move up from there: 2 cents, 3 cents, and so on. Every little bit helps!