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| Retirement Income
Goals: How Much Is Enough? |
| You wouldn't prepare for a party without knowing whether to expect 20 or 200 guests. Likewise, you shouldn't start saving for your golden years without setting realistic retirement income goals. |
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| The reason it's so important to set a retirement income goal is that it will help you design a more effective and appropriate investment strategy for your account. It also will help you determine how much risk to assume (you should never assume any more risk than is needed to meet your goal). |
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| But picking an actual dollar amount is harder than it sounds. Aim too low and you'll sell yourself short. Aim too high and you risk investing too aggressively or being discouraged by the amount you'll need to invest. |
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| Your salary is probably the best way to benchmark your retirement goal. Think about what you are spending now. Will you be able to live without some of the luxuries you currently splurge on? If not, you should count on retiring on 100% of your work income. If you're willing to cut back a little, that figure may be a little lower (most experts will argue that you need at least 70% of your salary at retirement in order to live comfortably). But remember, too, that your health costs may increase significantly in retirement. So your salary at retirement may be a good, conservative guide to how much you'll want to retire on. |
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| Of course, the younger you are, the harder it is to predict how much you'll be raking in prior to retirement. |
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| Once you have something to base your goals on, you can plan and save accordingly. After all, setting goals is only a start—you'll have to follow through in order to meet them. |
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