Estimate Your Retirement Income Needs

Estimate Your Retirement Income Needs

Planning for your retirement is important, and the first step is to estimate how much income you will need to fund retirement. Retirement planning is not an exact science, so an Independent Financial Consultant may help define and address specific needs depending on your goals and other factors.

A starting point is your current income

One method is calculating annual retirement income as a percentage (typically 60% to 90%) of your current income. The appeal lies in its simplicity, and there is a common-sense analysis underlying it: If your current income sustains your present lifestyle, taking that income and reducing it by a specific percentage to reflect discontinued expenses such as payroll taxes, theoretically can you sustain your current lifestyle?

Caution, a simple approach may not account for your specific situations. Travel, healthcare, family, or other commitments might require 100% (or more) of your current income. Use a percentage of your current income as a budget benchmark but examine your current and future expenses in detail. Imagine how those costs will change over time as you transition into retirement.   A Certified Retirement Counselor© can assist you in retirement planning for your unique circumstances.

Project your retirement expenses

Your annual retirement income should be adequate to meet your future expenses. Estimating those expenses is a major part of retirement planning. Holistic Financial Advisors like Shannon M. Sutherland can assist in planning for your future financial needs.

Here are some common retirement expenses:

 Food and clothing

• Housing: Rent or mortgage payments, property taxes, homeowners' insurance, property upkeep and repairs

• Utilities: Gas, electric, water, telephone, cable TV

• Transportation: Car payments, auto insurance, gas, maintenance and repairs, public transportation

• Insurance: Medical, dental, life, disability, long-term care

• Health-care costs not covered by insurance: Deductibles, co-payments, prescription drugs

• Taxes: Federal and state income tax, capital gains tax

• Debts: Personal loans, business loans, credit card payments

• Education: Children's or grandchildren's college expenses  

• Gifts: Charitable and personal Pag

• Savings and investments: Contributions to IRAs, annuities, and other investment accounts

• Recreation: Travel, dining out, hobbies, leisure activities

• Care for yourself, your parents, or others: Costs for a nursing home, home health aide, or other types of assisted living

• Miscellaneous: Personal grooming, pets, club memberships

Inflation must be considered as well as year-to-year changes in retirement expenses. Your home mortgage or your children's education may be paid off early in retirement. Expenses such as health care and insurance may increase as you age. Simple Impact LLC and Shannon Sutherland, Financial Advisor can help you account for these variables and build a retirement plan for the future.

A Fee only Financial Advisor professional can help you with the estimates to make sure they are as accurate and realistic as possible.


Decide when you will retire

To determine your total retirement needs, you can't just estimate how much annual income you need. You also must estimate how long you will be retired. The longer your retirement, the more years of income you will need to fund it. The length of your retirement will depend partly on when you plan to retire. This crucial decision typically revolves around your personal goals and financial situation. It is important to remember that retiring at 50 will end up costing a lot more than retiring at 65. Retirement Plan Consultants Simple Impact LLC can help you plan for your future.

Estimate your life expectancy

Your retirement duration is determined by retirement age and your lifespan. A longer life means more years of retirement to fund. You may run the risk of outliving your retirement and additional income sources. Make an estimate of your possible life expectancy. Use government statistics, life insurance tables, or a life expectancy calculator to get a reasonable estimate. Experts base these on your age, gender, race, health, lifestyle, occupation, and family history. Remember, these are just estimates but with life expectancies on the rise, it is best to assume you will live longer than you expect. An Independent Wealth Advisor can assist you in making informed decisions that factor in your personal preferences and situations.


Identify your sources of retirement income

Ascertain what sources of retirement income will be available. You may be entitled to Social Security as a portion of your retirement income. Visit the Social Security Administration website ( for a personal account estimate of future benefits, or manage the benefits you already receive. Your employer may offer a traditional pension with monthly benefits. Additional sources of retirement income may include your savings into a 401(k), 403(b), IRAs, annuities, and other investments or retirement plans. The income you receive from those sources will depend on the amount invested, the rate of investment return, and other factors. Finally, if you plan to work during retirement, your earnings will be another source of income. A financial planner like Shannon Sutherland Certified Retirement Counselor©, can assist in projecting your future income.  

 Make up any income shortfall

There are steps that you can take to remedy income shortfalls:

• Try to cut current expenses so you will have more money to save for retirement

• Shift your assets to investments that have the potential to substantially outpace inflation

     (Investments that offer higher potential returns may involve a greater risk of loss)

• Lower your expectations for retirement so you will not need as much money

• Work part-time during retirement for extra income

• Consider delaying your retirement for a few years

A Financial Advisor near me can help to figure out the optimum choices for a fulfilling retirement.