Retirement Savings Goal.

ow Much Do I Need To Save

Many Americans realize the importance of saving for retirement, but knowing exactly how much they need to save is another issue
altogether. With all the information available about retirement, it is sometimes difficult to decipher what is appropriate for your specific
situation.

One rule of thumb is that retirees will need approximately 80% of their pre-retirement salaries to maintain their lifestyles in retirement.
However, depending on your own situation and the type of retirement you hope to have, that number may be higher or lower.

Fortunately, there are several factors that can help you work toward a retirement savings goal.

Retirement Age
The first factor to consider is the age at which you expect to retire. In reality, many people anticipate that they will retire later than they
actually do; unexpected issues, such as health problems or workplace changes (downsizing, etc.), tend to stand in their way. Of course,
the earlier you retire, the more money you will need to last throughout retirement. It’s important to prepare for unanticipated occurrences
that could force you into an early retirement.

Life Expectancy
Although you can’t know what the duration of your life will be, there are a few factors that may give you a hint.

You should take into account your family history—how long your relatives have lived and diseases that are common in your family—as
well as your own past and present health issues. Also consider that life spans are becoming longer with recent medical developments.
More people will be living to age 100, or perhaps even longer. When calculating how much you need to save, you need to factor in the
number of years you will spend in retirement.

Future Health-Care Needs
Another factor to consider is the cost of health care. Health-care costs have been rising much faster than general inflation, and fewer
employers are offering health benefits to retirees. Long-term care is another consideration. These costs could severely dip into your
savings and even result in your filing for bankruptcy if the need for care is prolonged.

Factoring in higher costs for health care during retirement is vital, and you might want to consider purchasing long-term-care insurance
to help protect your assets.

Lifestyle
Another important consideration is your desired retirement lifestyle. Do you want to travel? Are you planning to be involved in
philanthropic endeavors? Will you have an expensive country club membership? Are there any hobbies you would like to pursue? The
answers to these questions can help you decide what additional costs your ideal retirement will require.

Many baby boomers expect that they will work part-time in retirement. However, if this is your intention and you find that working longer
becomes impossible, you will still need the appropriate funds to support your retirement lifestyle.

Inflation
If you think you have accounted for every possibility when constructing a savings goal but forget this vital component, your savings could
be far from sufficient. Inflation has the potential to lower the value of your savings from year to year, significantly reducing your purchasing
power over time. It is important for your savings to keep pace with or exceed inflation.

Social Security
Many retirees believe that they can rely on their future Social Security benefits. However, this may not be true for you. The Social
Security system is under increasing strain as more baby boomers are retiring and fewer workers are available to pay their benefits. And
the reality is that Social Security currently provides only 27% of the total income of Americans aged 65 and older with at least $50,000 in
annual household income.1 That leaves 73% to be covered in other ways.

And the Total Is…
After considering all these factors, you should have a much better idea of how much you need to save for retirement.

For example, let’s assume you believe that you will retire when you are 65 and spend a total of 20 years in retirement, living to age 85.
Your annual income is currently $80,000, and you think that 75% of your pre-retirement income ($60,000) will be enough to cover the
costs of your ideal retirement, including some travel you intend to do and potential health-care expenses. After factoring in the $12,000
annual Social Security benefit you expect to receive, a $10,000 annual pension from your employer, and 4% potential inflation, you end
up with a total retirement savings amount of $760,000. (For your own situation, you can use a retirement savings calculator from your
retirement plan provider or from a financial site on the Internet.)

The estimated total for this hypothetical example may seem daunting. But after determining your retirement savings goal and factoring in
how much you have saved already, you will be able to determine how much you need to save each year to reach your destination. The
important thing is to come up with a goal and then develop a strategy to help reach it. You don’t want to spend your retirement years
wishing you had planned ahead when you had the time. The sooner you start saving and investing to reach your goal, the closer you will
be to realizing your retirement dreams.

Note: The information provided here is to assist you in financial planning. The information in this article is not
intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax
penalties. You are encouraged to seek tax or legal advice from a professional and licensed tax or legal advisor.

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