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“How much money will I need in retirement?”

It’s a question we get asked often, from people in all age groups, professions, income levels, and geographical locations. And from people with diverse spending habits.

Of course, lots of people stand ready to share a formula or fixed-target amount they’ve heard. One recent study found that average Americans believe they’ll need $1.7 million to retire. Another often-mentioned opinion suggests you’ll need 80 percent of your pre-retirement annual earnings after retiring.

But there is no cut-and-dry answer to the question. Therefore, our response when people ask us how much they’ll need for retirement is not what most expect to hear.

“You tell us,” we say.

The fact is, how much money you need for retirement depends on the lifestyle you want when you retire. And that requires asking yourself some questions.

Do you want to live in your current home, downsize, or move to a more pleasant climate? Are you planning to drive a similar car or splurge on that rebuilt 60s classic you’ve always wanted? Are you looking to travel more often and, if so, to where?

And those are the easy questions. Harder discussions involve how you plan to pay for healthcare, at what age you will begin drawing Social Security benefits, who else depends on your income, and how much debt you still have.

Only with answers to those and many more issues could we begin to project how much money you’ll need to set aside for retirement. So don’t be surprised when a professional financial advisor responds to your how-much-money-will-I-need-in-retirement inquiry with a list of questions for you.

The good news is that collecting answers to those questions enables your financial advisor to help you begin budgeting for retirement. So while we can’t provide a one-size-fits-all solution to determining how much you’ll need when you stop working, we can help prepare you to answer the question for yourself.

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Prepared by The Creative Block, Inc. Copyright 2020.
The Creative Block, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances.
To the extent that this material concerns tax matters, is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
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