Typical question you might ask yourself. How much they’re going to spend in retirement? Most haven’t a clue. To plan for retirement effectively though, you need to have some sense of what your spending needs are actually going to be. From that you can draft a plan of what it looks like when you do actually retire.
Knowing what you will spend helps you square of how much you need to save. Just like everything else in finance, figuring out how much you will spend in retirement is a big “it depends.” Most folks want to carry the same standard of living into retirement they had while working. Same standard of living, same cost of living, right? It’s not quite that simple. Retirement changes everything, including how you determine your budget.
Most people end up needing less income in retirement than they did while working, because, among other smaller reasons:
- You don’t have job-related expenses anymore
- You don’t need to save for retirement anymore
- You aren’t paying as many taxes since you’re income is lower
One common strategy is called the “Replacement Ratio” which is using a percentage of your pre-retirement income that you plan to spend every year in retirement.
Lastly, you need to get a good indication of how you will invest for your retirement. Having mutual funds, with a mix of volatility is a good way but will depend on your age and other factors. However, one strategy that many leave out is supplementing your retirement with gold and other precious metals.
Be sure to include the gold investing strategy for retirement. The process is easy and the benefits numerous. Look at this retirement chart to find out if your current investment vehicles qualifies for gold and precious metals investing.