Do you know how long your current retirement savings will last? Most American households have far less than they need for retirement. According to a study by the National Institute on Retirement Security, “62% of working households ages 55-64 have retirement savings less than one times their annual income, which is far below what they will need to maintain their standard of living in retirement.”
Running out of money in retirement can be a personal tragedy for you and your family. Consider the following factors when determining how much to save now so that you can have the financial freedom you deserve in your later years. (For related reading, see: How Much Should You Contribute to Your 401(k)?)
How Long Do You Need Money to Last?
The Centers for Disease Control publishes its Life Tables periodically. If you are 50 years old today, its chart suggests that you can expect to live until you are age 82. However, these are averages across the entire U.S. population. Because about half of us will live longer than the average, planning for the average will leave a lot of us without money at the end of our lives. Your health and your genes will be significant factors in understanding your life expectancy, and therefore, the time horizon of your portfolio plan.
What does this mean to you? It’s always better to plan for a longer retirement. Saving too much and leaving a legacy for your family or favorite charity is much better than coming up short.