![]() No one has a crystal ball as to what healthcare costs may befall you and your loved ones. The future therefore could be much longer than people think, hence our focus on The Rule of 100. Many researchers think there will be a boost that may well push average life expectancy for people at 75 into the low 90s, and increase again the number of people living past 100. If they reach 75, men can expect to live, on average, until 86 and women 88. Longevity and Its Impact on Your Magic NumberĬurrently, the average life expectancy once someone reaches the age of 65 is 84 for men and 87 for women, according to the CDC. All together, these pieces create a snapshot to make sure the projected spending amount in retirement remains in alignment with projected costs of living. Your annual spending projections should ideally account for 2-3% inflation per year. Inflation is another cost to take into account. Your employer may have paid for healthcare costs in full or part beforehand, too. Healthcare costs may also be a consideration in retirement, as these could increase from where they were in your pre-retirement years when they were less of a concern. This can help clarify these plans for you. Then separate these from miscellaneous spending, such as vacations and other less frequent expenditures. Identify your monthly fixed-income needs-food, housing, utilities, clothing, transportation, entertainment, medical needs, and so on-and multiply these by 12 months for a yearly snapshot. Conversely, if you are one of the many people who choose to put off the “good life” until you retire, your income needs may be higher. If so, an income replacement ratio that is too high could potentially have unnecessary taxable implications: retirees using an income replacement strategy may make excess withdrawals from their retirement accounts, which could bump them into a higher tax bracket. So it doesn’t make sense that a “magic number” for one individual, couple or family is universal.įor example, let’s say your post-retirement plans include lower income needs. What’s your lifestyle now? What will it look like in post-retirement? Traveling around the world? Downsizing and becoming fulltime grandparents? Start a Second Act career? Supporting your kids if they move home? Living large and blowing it on a Porsche? Well, not everyone has retirement plans. However, that figure may not apply to the actual income you need after you retire. An income replacement number for retirement is often initially based on the income you have prior to your retirement. ![]() Take a look at your income before and imagine it after the gold watch. And, for some, they can get louder closer to retirement – when that “magic number” really matters. ![]() Do I have enough to do what I want? Did I save enough for retirement? Have I been living beyond my means? Do I have to keep working for another few years? Will I live to 100? These questions echo in almost everyone’s head, especially late at night. The “magic number” to retire comfortably – as worry-free as possible – has always been a hot topic between financial professionals and their clients.
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