How much money do you need for retirement?

Even if you meticulously review your retirement savings and anticipated retirement plan, inflation, volatility in the stock market, and unexpected bills can derail your strategy. So how much money do you need for retirement? Here are a few things to keep in mind.

Rising Costs (and the Future Impact of Inflation)

Rising costs caused by inflation can erode your purchasing power in retirement. The savings that you thought would be sufficient may no longer be enough.

Take inflation into account when deciding how much you need to save for retirement. Look for a comprehensive calculator that considers inflation when calculating your savings goal.

For example, the retirement savings calculator at Bankrate includes an expected inflation rate of 2.9 percent but allows you to adjust the number for more accurate projections.

To increase the chances that your investment returns outpace inflation, utilize a variety of savings options.

Market Volatility

It can be disheartening logging into your retirement account to see the value of your account has dropped significantly in a day.

However, it’s important to remember that it’s normal for investments to fluctuate in value; consider focusing on creating a mix of investments that have the opportunity to increase in value over time.

Another thing to remember is that you don’t lock in your losses until you sell your funds. Avoid panic selling in an attempt to minimize future losses; panic selling locks in your losses and reduces your overall returns.

If you’re worried about your ability to not panic during market volatility, consider avoiding checking your account daily; this may only fuel your anxiety.

Make sure you’re invested in funds that are suitable for your preferred risk level. As you near retirement, consider keeping the portion of your savings that you’ll need over the next few years in an investment option that may retain its value even with market fluctuations.

Unexpected Expenses

You’re facing an unexpected medical bill, or your car needs expensive repairs. Don’t let these unexpected bills cause your retirement savings to fall short.

Make sure that you’re prepared for these irregular expenses by setting up an emergency fund or sinking fund. An emergency fund ensures you have money available for true financial emergencies, like job loss.

A sinking fund is an account you use to set aside money for expenses that you can anticipate but tend to overlook when budgeting. This includes things like:

  • Car repairs and maintenance
  • Home maintenance and repairs
  • Holiday expenses
  • Medical and dental expenses
  • Insurance premiums

Review your bank statements to see how much you spend on these items, and then set aside a certain amount each month to fund the account before you need it.

For example, if there are six months until the holiday season and you usually spend $2,000, set aside $334 each month to prepare for holiday expenses.

Consider Getting Help Revamping Your Retirement Savings Strategy

Feel your retirement savings strategy needs updating? Contact us for help with your retirement savings management.

Advisory services are offered through Quantum Strategies, LLC dba Quantum Strategies, a Registered Investment Advisor in the State of Pennsylvania. Insurance products and services are offered through William Rizzo, Sole Proprietor.