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How Much Money Should You Have to Retire? Thumbnail

How Much Money Should You Have to Retire?

By Angela Dorsey 

What’s your vision of the perfect retirement? Are you picturing cozy moments close to home, surrounded by loved ones? Or perhaps you’re dreaming of globe-trotting adventures or basking in the sun in a tropical paradise? Many retirees also relish the idea of diving into new hobbies or giving back through volunteering. 

As you contemplate your golden years, you’re probably also wondering about the financial side of things and if it’s possible to keep sustaining your lifestyle in retirement. Wouldn’t it be wonderful to have a clear road map to guide you toward your specific retirement goals? In this article, we explore key questions that can help shape your retirement vision and empower you to turn those dreams into reality. 

What’s Your Ideal Retirement Date?

Many of us desire the flexibility that comes with retirement, whether that means retiring early or lightening your workload little by little so you can invest your time and energy into what’s most important. Your age (now and in retirement) is one of the most significant factors to consider when planning for your future. If you want to retire early, you’ll need to make sure your investments are set up to start withdrawals without sacrificing growth. You’ll also want to run a variety of scenarios with different market timing to determine the best strategies to maximize your wealth

What Do You Want Your Retirement Life to Look Like?

Have you thought about the type of lifestyle you want to have in retirement? If you know you want to travel, play golf, or spend time with your grandkids, you need to factor in what that looks like, how much it will cost, and how you’ll make it happen.

For example, if you plan to travel, you’ll need to consider: 

  • Will you be traveling stateside or internationally?
  • How often do you want to travel?
  • How would you like to get there? (e.g., car or RV; first class on a plane or your own plane)
  • Where would you like to stay? (e.g., 5-star hotel, Airbnb, with family members)
  • Will you be traveling with your family? Would you like to cover their expenses too?
  • Will you maintain your primary residence? If so, who will watch your house and maintain it while you’re gone?

Even if your dream is simply to spend time with your grandkids, you’ll still need to think through your expectations. To some people, “spending time with grandkids” means babysitting a few times a week. To others, it means footing the bill for all-expenses-paid trips to various destinations of their choosing. Whatever it is you want to do with your time, map out the details so you can have a clear picture of how much you need to allocate to make it a reality. 

Will You Earn an Income in Retirement?

Although you won’t need to work during your retirement, it’s a great way to stay active, keep your mind sharp, and maintain a sense of purpose—and maybe even help you live longer. Some retirees choose to build a second career around things they are passionate about. No matter what you do, if you plan to work during retirement, you’ll have more resources to afford even greater financial flexibility.

What Kind of Healthcare Coverage Do You Expect to Have?

Right now, you most likely have health insurance. When you stop working, you’ll need to secure healthcare coverage another way. You may be able to utilize your spouse’s plan if he or she is still working. Or you can get coverage through the healthcare marketplace. You qualify for Medicare starting at age 65, but even then, you may want additional coverage to pay for prescription drugs, dental care, eye exams, and other expenses. 

Retirees sometimes fail to fully plan for expenses during the later stages of retirement, and medical care often tops the list. It’s estimated that retirees will use 15% of their income for health expenses, and the average retired couple could see healthcare expenses of approximately $315,000 (after tax) after age 65. Don’t let this be a planning oversight that prevents you from retiring comfortably!

Will You Have Any Dependents?

Your kids may be grown and out of the house by the time you retire, but that doesn’t necessarily mean you’ll stop supporting them financially. According to a recent study, about half of parents still give financial support to their adult children. 

And even if you aren’t helping your kids out with daily expenses, you may want to contribute to their weddings, down payments on homes, or tuition for your grandkids.

Will You Leave an Inheritance for Your Family?

Most people want to leave a financial legacy for those they leave behind, but if you plan to pass your wealth to your children and grandchildren, it’s important to make the transition as smooth as possible with a comprehensive estate and legacy plan. Be sure to consider what kind of legacy you want to pass down. Legacy planning allows you to incorporate family or financial values into your wealth transfer. If your children aren’t as adept at money management or have made financial mistakes in the past, your legacy planning can help guide them through what to do with their new wealth. Finally, legacy planning may help protect your grandchildren and encourage generational wealth-building for decades to come.

What Is Your Charitable Giving Plan?

Do you want to continue your generosity when you’re retired? What will that look like? Whether it involves setting up a foundation or leaving assets for charities in your will, a smart charitable giving plan can help ensure you continue to support the causes you care about. There’s no lack of options when it comes to giving, so be sure to explore donor-advised funds, qualified charitable distributions, or charitable remainder trusts to not only bless others but also possibly minimize your taxes and maximize your gift. 

How We Support

Deciding how to finance your ideal retirement and sustain your lifestyle isn’t a one-size-fits-all equation. It calls for a comprehensive approach, considering factors like your financial status, family background, and future goals.

Starting with a focus on your retirement priorities lays a solid foundation for your planning journey. It’s also wise to assess how to mitigate risk in your investment portfolio and allocate your assets based on your needs and family dynamics. Adopting a long-term perspective helps equip you to weather market fluctuations and economic uncertainties.

At Dorsey Wealth Management, our mission is to streamline financial management while tailoring our services to suit your unique situation, empowering you to make confident financial decisions. If you’re a current client or someone who is seeking a partner to strike the right balance between enjoying life and safeguarding your financial future, schedule a free introductory 30-minute phone call. You can also reach us at (310) 370-7776 or angela@dorseywealth.com. We look forward to speaking with you!

About Angela

Angela Dorsey is the founder and financial advisor at Dorsey Wealth Management, a fee-only financial planning firm based in Torrance, California, helping women prepare for retirement. Angela earned a BS in computer science from Loyola Marymount University, an MBA from UCLA Anderson School of Management, and spent 20 years as a Senior Compensation Specialist in large corporations before becoming a CERTIFIED FINANCIAL PLANNER™ professional and a Registered Investment Advisor (RIA). That background gave her the tools to couple with her passion for empowering women to make the best financial decisions possible. Angela lives in Torrance, California, with her husband. She enjoys spending time at the beach or surrounded by nature. To learn more about Angela, connect with her on LinkedIn.