How Much Pre-Retirement Income Do I Need?
One question that many people have when trying to plan for retirement is how much pre-retirement income they will really need when they are retired. This is difficult to say as an overall percentage. Everyone’s situation is different. Here are some things to consider when thinking about this question.
The first thing that you should do is ask yourself some questions. How much do I make now? What kind of lifestyle do I have now, and do I plan to continue that lifestyle after retirement? What kind of hobbies do I have and how much do they cost? What kind of bills will I have after retirement? What other possible expenses will I have after I retire? All of these questions are important and need to be answered.
You should sit down with some paper and your questions, bring your current budget. Try to work on a budget after you retire. Do not focus on how much money you have coming in, but rather what your expenses are going to be. This is going to be different than making your normal budget. You will be working backwards. With your normal budget you took the amount that you made and split it up. With this budget you will take your expenses, add them up, and find out what the minimum is that you can live on after you retire.
Once you have done this you will have a better idea of how much pre-retirement income you will need. The next thing that you need to do is to get out all the statements that have to do with your retirement savings. Then you have to ask yourself some more questions. Do you have enough saved to live on the budget you have created into your 90s? If not what are you going to do to increase your retirement savings? Are you going to consider working in retirement? If not, what are you going to do in retirement if you need money? These are important questions that need to be considered carefully.
The amount of pre-retirement income that an individual needs will be different from person to person. The best way to figure out what you need is to simply sit down and work it out. Make sure to take your time when doing this. If you rush through it you could make a mistake and end up running out of money while in retirement leaving you in a bad financial position.