There’s a lot of misleading information out there about retirement planning. Unfortunately, many investors aren’t properly educated on the challenges presented by financial planning or the solutions to overcome them. If you want to build confidence and reduce your stress levels, consider these popular myths and embrace the tried-and-true methods to enter your golden years comfortably.
1. You can calculate exactly how much you need to save for retirement
It’s very common to wonder how much money you need to retire. Unfortunately, there’s no concrete answer to that question. Everyone’s circumstances are different, so the answer is different for everyone. That’s especially complicated for young people because there are so many things that can change over the decades between now and the day they stop working.
The real answer is that you need enough to cover your basic needs and desired lifestyle. That might be frustratingly unspecific, but it’s better than a specifically incorrect number. Luckily, there are some important things to consider to make sure your bases are covered, no matter what your retirement goal number winds up being.
First, you need to know what your annual cash needs are. It’s easier if you’re close to retirement because you know what your monthly bills are. If you’re younger, you need to adjust for inflation — $5,000 in monthly bills today will probably cost closer to $9,000 in 20 years, assuming 3% annual inflation. For reference, the median household retirement income is around $60,000, and the average person incurs $300,000 in healthcare expenses during retirement.