How Much Money Do I Need to Retire?

How much money do you need to retire? It’s a tough question to answer because a lot depends on you. What are your retirement plans? Have you calculated your living expenses? What area do you live in? Let’s look at a few of these things to understand how much money you need to retire.

 

Calculate Living Expenses

Before you can determine how much money you need to retire, you’ll need to have a pretty good understanding of what you spend on a monthly basis. To do this, consider how much you spend on your monthly essentials. Below are several common monthly expenses to consider.

 

Mortgage/rent/HOA

Homeowners or renters insurance

Property tax

Auto insurance

Health insurance

Out-of-pocket medical costs

Life insurance

Electricity and natural gas

Water

Sanitation/garbage.

Groceries, toiletries, and other essentials.

Car payment

Gas

Public transportation

Internet

Cell phone and/or landline

Student loan payments

Other loan/credit card payments

 

Of course, this list isn’t exhaustive. You might also want to consider things like a travel budget, investment in new hobbies (the average cost of an annual gym membership is around $500), and even holiday spending (average households spend anywhere from $1,000 to $1,500). All of these expenses are important to understand, as they can impact the amount of money you need to retire.

 

Best Retirement States

The cost of living in your area is another important thing to consider when trying to calculate living expenses and how much money you need to retire. Although it’s worth noting that your social security benefits are calculated based on where you live and may go up slightly if you move to a more expensive area.

 

That said, you’ll see more of your social security income if you move to a tax-friendly retirement state.  The most tax-friendly states to live in are Alaska, Florida, Georgia, Mississippi, Nevada, South Dakota, and Wyoming.

 

These states tend to have no state income tax, no tax on retirement income, or a significant tax deduction on retirement income. They also usually boast low sales, property, estate, and inheritance tax rates which makes them some of the top states for retirees. That said, even if you aren’t planning on moving during your retirement, it is a good idea to have a full understanding of your area’s cost of living and retirement benefits, because, again, it can have a big impact on the amount of money you need to retire.

 

Retirement Community Costs

Another thing to consider when trying to determine how much you need to retire is whether or not you would like to live in a retirement community. Retirement community costs can vary, depending on the type of community you choose to live in. Del Webb over 55 communities offer a balance of on-site amenities—like on-site activity directors to help you stay active, fitness classes, clubhouses, and indoor pools—without interfering in how you live your day-to-day life.

 

The advantage of active over 55 communities is that you can maintain your independence while keeping a pretty active life—all without adding any unexpected expenses (any fees associated in these communities are included in your monthly mortgage and HOA).

 

However, if you are looking for services that extend beyond that—like daily meals or transportation to and from certain destinations, then you might have to budget for more when you calculate your living expenses.

 

Deciding how much money you need to retire is a very personal decision. But learning how to calculate your living expenses, exploring the best retirement states, and planning for retirement community costs can help you get a more clear understanding of where you want to be.

 

 

Contributed to The 55+ Society by Brittney Villalva

Looking for more Society tips and learnings? Return Home here.

Published 1.7.22   

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