How much do I need to have saved to retire? This is the question I get asked by Realtors® time and time again. And the answer is: It depends.
Here are a few common variables that have a massive impact on that answer:
- What are your living expenses?
- How much debt are you carrying?
- Does your spouse have a pension?
- Have you purchased any income property?
- At what age do you want to cut back? Retire completely?
Depending on your answers to the above questions, your “number” required to retire with confidence can vary dramatically.
So, while some general rules of thumb may be able to get you pre-qualified for retirement, here are the steps you can take with your financial plan to get fully pre-approved.
The most intimidating part of financial planning can sometimes be just figuring out where to start! To that end, the first step is gathering all your financial data and organizing it into a condensed central hub. With all your data at your fingertips, you can begin to put the pieces of your financial plan together.
Here is some data that will likely be required to get organized:
- Most recent tax return (personal and business)
- Mortgage statements
- Real estate holdings estimated values
- Estate planning documents
- Insurance policies
- Investment account statements
- Retirement account statements
- Pension estimates
As with any other calculation, the “garbage in, garbage out” rule applies. So, the more accurate and reliable data you can produce, the more accurate and reliable the output will be.
Make a Plan
Your financial plan is the intersection of your financial data and your personal goals. While building out your financial plan begins with where you stand today, it must also encompass your goals. Based on the actions you plan to take in the future, the trajectory of your financial plan will take shape.
Here are some common forward-looking actions that you will need to assess as you make a plan:
- Is your emergency fund fully funded?
- What is your current savings rate?
- How quickly are you paying off your debt?
- Is your lifestyle adequately insured?
- What is your annual cash flow?
- Do you have estate planning documents in place?
- Where is your estimated Social Security income?
Live Your Life
Life is fluid, and your financial plan needs to be too. For that reason, your plan will likely not be something you address once and then put on the shelf.
Typically, a regular cadence of checking in on your financial plan at least semiannually is recommended.
Here are some common adjustments you may make as you Live Your Life:
- Primary home relocation
- Changes in income or expenses
- Updates to legacy planning
- Changes in state and federal tax code
- Needs for insurances come and go
- Changes in hobbies and passions
- Property purchases and sales
- Business purchases and sales
Ready to build out your retirement pre-approval letter? Schedule a meeting with a CFP® professional to start the financial planning process.