How Much Do You Need to Retire? Four Ways to Achieve That Magic Number


December 5 2016

Of the 46 Frequently Asked Questions about Retirement, this one is at the top of the list for many people approaching retirement:

“How much do I need to save before I retire?”

The answer is hardly simple, as John Wasik points out in the article below. Because you don’t know how long you will live, how much you will spend on health care, or how inflation will affect prices for everyday expenses, it can be challenging to determine the right number for your retirement savings.

But with some planning and financial advice, you can take steps towards a comfortable retirement.

In the article below, John Wasik discusses four ways to increase your retirement savings. For personal advice and tailored recommendations, contact Jordan Dechtman Wealth Management at 303-741-9772 or request your free Retirement Income Analysis.

How Much Do You Need to Retire? Four Ways to Achieve that Magic Number
John Wasik

Here’s a simple formula for retirement saving: Figure out how much money you’ll need for basic living, healthcare, travel and other expenses for the rest of your life and subtract the money in your kitty at retirement age. The difference is what you’ll need to squirrel away.

I know. This is a patently absurd proposition because few of us know how long we’re going to live or will pay for out-of-pocket healthcare. It all depends on…how long you’re going to live and how much everything will cost in the future.

There are thousands of financial planners and advisers willing to give you estimates. Or you can run the numbers yourself on any number of calculators.

But math scares most people, so I’ve given you an easy way to digest this difficult problem: Save as much as you can. Fortunately, there are myriad vehicles that will help you get there. Here are four suggestions:

– 401ks, 403bs, 457 Plans. These defined-contribution plans are the choice of most employers. Although they were never intended to be mainstream retirement programs, they are the only way half of working Americans save for retirement.

For 2017, you can save up to $18,000 a year in one of these plans, unchanged from this year.

– Make a catch-up contribution. If, like me, you’re over 50, you can save a little more. You can boost your savings by $6,000 a year for all defined-contribution plans and $3,000 for SIMPLE plans.

– Open a Roth IRA or 401(k). These vehicles tax you on the money going into the plan, but allow for tax-free withdrawals if you’re over 59 1/2 and your money was invested at least five years.

Remember that all withdrawals from 401(k)-type plans are taxable, so having a Roth is a good supplement to your retirement savings program.

– Invest on the side. If you’re self-employed, you can still open a “self” 401(k), Roth or conventional IRA. And if you have a high-deductible health plan, you can also invest in a Health Savings Account (HSA).

If used for health-related expenses, HSA proceeds are tax-free, but you can still use the funds to supplement retirement, although you’ll be taxed on the withdrawals.

For individuals, you can sock away $3,400 annually in an HSA for 2017; $6,750 per family. There’s a $1,000 catch-up contribution for those over 55.

How do you get all of these plans funded? Put them on autopilot. If your employer has an automatic enrollment or escalation — when you get a raise you automatically contribute more — take advantage of it.

Another route is to choose a target-date fund within a 401(k). While these vehicles aren’t perfect, they will automatically invest your money in mutual funds and reduce stock-market risk the closer you get to retirement.

At the very least, get a regular savings program in place. If you’re saving 15% or more of your annual income, that’s a start. Don’t wait until next year to get going.


This article was written by John Wasik from Forbes and was legally licensed by AdvisorStream through the NewsCred publisher network.

For more advice on retirment planning and financial management, request your free Retirement Income Analysis or simply call Jordan Dechtman Wealth Management at 303-741-9772.