All kidding aside, you moving in with your kids isn’t an attractive scenario for you, or them.
A top concern for many Americans is not having enough money saved for retirement. If that’s true for you, I’m going to get you moving in the right direction so you can retire in your own home and visit your kids when you feel like it.
Part of my work as a financial advisor deals with numbers, but a far greater amount is focused on behaviors and perspective. All of these will be necessary if you’re going to have the financial future you want.
Old age, barring unforeseen circumstances, is coming for us all. Along with that, a desire to work less or not at all. To fund that desire, decisions must be made, money saved and invested.
In order to stop working, how much will it take? Important note: In examples below, I use round numbers but you’ll need to be specific when figuring out your personal situation (and no, this isn’t financial advice).
Start by determining your estimated Social Security benefit. In 2020, the average monthly benefit amount in January was $1,500 which works out to $18,000 a year per person. American’s average annual expenses are around $60,000 (per household), so you’ll need to generate an additional $24,000 per year if you’re married (and both of you have Social Security) to get to that average annual expense number, or an additional $42,000 if you’re single. There are a lot of ways to generate income in retirement and this post isn’t going to go into the finer points and different options for making that happen.
Using a guaranteed annuity, you could generate $25,000 a year by purchasing an annuity with about $500,000. That $25,000 closes the gap to successfully cover the average annual expenses of $60,000. A single person would need an additional $42,000 in addition to social security benefits, which would require an annuity purchase of about $840,000.
So how much do you need to be saving and investing in order to reach those numbers?
Let’s assume you’re 40 years old. Let’s also assume you’re going to work until 67 because that’s full retirement age for social security. Let’s also assume you don’t have any money saved, so you’re starting from $0.
In order to accumulate $500,000 over the course of 27 years at an 8% rate of return (which is arbitrary), you need to put away about $438.00 a month. To accumulate $840,000, you need to put away about $736 per month. You can find the calculator I used here.
Nervous? Scared? Inspired?
Whatever you’re feeling, let’s figure out how to get there.
Can you start saving that much today? If you’re not able to, you have a couple of options. You can start earning more money, or you can start living on less. If you have extra time, attention, and energy, check out SideHusl.com to learn about money making opportunities.
In regard to living on less, I know this is tricky. I’d much rather be talking about increasing your lifestyle and doing fun things. That being said, this post is all about ensuring you won’t have to move in with your kids, so you may need to make some tough decisions.
Life is all about perspective and how you look at something makes all the difference. Think about it like this: you may need to make difficult changes and tough choices right now, but they’re not necessarily forever. The first step is getting yourself on the track to long-term financial success.
If you need to get out of debt, you can access our Get Out of Debt course for free here.
If you need help with budgeting or getting started saving and investing, we can help there as well.
I’d love to get your feedback. How are you feeling after reading this? What actions are you going to take? What help do you need?
As always I encourage you to talk with someone about what you’re working on to get better. Talk to a friend, coworker, or your favorite cousin. Don’t feel like doing that? Get info on financial coaching and hop on a call. As always, ask us anything. Enter your question here. We answer all of them.