Choose Your Future
How much will you
really need to retire?
Today Factors to Consider
n If you plan to retire early, you’ll need to save
even more aggressively.
o you know how much you’ll need Do the Math…
to have saved up to retire comfort- Jennifer is 30 years old, making $40,000 n If you plan to travel or live more lavishly in
ably? It’s probably more than you think! retirement, you’ll need to save more.
per year. If she assumes she’ll average
Retirement experts estimate that you’ll a 3% pay raise each year, and wants to n Your money needs to last – most people live
need to have saved about 15 to 20 times retire when she’s 65, she’ll need about about 20 to 25 years after retiring.
your annual pay in the year before retire- $2 million to retire and maintain her n Health care costs not covered by Medicare
ment (also called your “final annual pay”) standard of living. Use the chart below to are significant and growing rapidly.
to maintain your pre-retirement standard figure out your “magic number.”
of living. n Social Security was only meant to replace
about 1/3 of your pre-retirement income.
Why do you need so much?
n “Winning the lottery” is not a realistic
Even if you want to, you probably retirement plan. Face it – you need to save!
can’t work forever. There are many
reasons you might not be able to continue
working. For example, one in ten people You’ll probably live a long time
over the age of 65 are unable to work due in retirement. You will need to have
to a chronic disability.1 enough money to support yourself for at
Money provides security. Food, least twenty years after you stop receiv-
clothing, housing and medical care all ing a paycheck. Also, the last three to
cost money. You may have other family five years of your life can be the most
members relying on your income, and expensive – you may need nursing home
you may also need to pay someone to and/or increased medical care. Medical
care for you when you are no longer able costs continue to climb: a person retiring
to care for yourself. in 2040 would need $245,767 (single)
and $291,532 (couple) for their health
care costs alone.2
Money provides choices. Whether
you plan to travel the world, spend time
with far-away family members or stay
Jennifer YOU Years to
home to pursue hobbies or volunteer work,
Age 30 5 1.13
your savings influence your options.
Current Pay 10 1.30
x 2.73 15 1.51 The Bottom Line
20 1.75 If you plan to simplify your standard of
annual pay 25 2.03 living, retire later than age 65, and will
= Retirement savings needed 30 2.36 have a good post-retiree health care plan
Final pay 35 2.73 to supplement Medicare, you may be able
times 15 + 40 3.17
to get away with saving less. However,
Final pay 45 3.67
the more you have saved, the more com-
times 20 +
fortable you’ll be when you retire.
She already has about $30,000 in her 401(k) plan, and saves 12% of her pay. If she keeps
up that pace, and gets an average rate of return of 8% on her investments, she’ll have
saved $2,046,000 by the time she’s 65.
1 Source: US Department of Health & Human Services
2 Source: Center for Retirement Risk at Boston College
While this newsletter and TRI-AD’s Web site can give you some tools to help you make investment decisions, you should consult a financial planner for more detailed guidance.