Why You Need to Calculate Your Retirement Needs

If ignorance is bliss, then you can consider the bulk of Americans as blissfully unaware of the amount of money they will need in order to enjoy a comfortable retirement. Only 46% of American workers have attempted to calculate how much they'll need when they leave the workforce.¹

If you haven't tried to determine your retirement needs, you may be in for a shock. Forty-four percent of workers who did a calculation made changes to their retirement savings strategies as a result. The majority of the changes involved saving or investing more.²

When you consider the following factors, there is a good chance that your retirement could cost more than you anticipate.

LIVING LONGER
A child born in 2007 can expect to live for 77.9 years.³ Just a half-century ago, the life expectancy was 69.9 years.⁴ As a result, some people may end up spending more time in retirement than they did in their working careers. When determining your retirement needs, consider that you may spend as many as three decades in retirement.

STAYING ACTIVE
More than ever, people are looking at retirement as an exciting stage of life that will allow more opportunities for adventure and activity. Whether it involves traveling, volunteering, or going back to school, an active retirement lifestyle may require more savings. The type of retirement lifestyle you desire will influence how much money you will need for retirement.

To help generate income. Policyholders may borrow against the accumulated cash value of a permanent life insurance policy for any number of uses, such as supplementing retirement income, paying off a mortgage, or sending family members to college. Access to cash value is through withdrawals or loans. Policy loans do not have to be repaid, but they reduce the cash value and death benefit by the amount of any outstanding loan balance plus interest. One additional benefit: withdrawals and loans are not subject to income taxes.

CARRYING DEBT
In 2007, 63% of U.S. households headed by someone age 55 or older still had mortgages or some other form of debt, an increase of almost 10% from 1992.⁵ Carrying debt into retirement can affect your retirement needs projections and should be considered carefully.

PAYING FOR HEALTH CARE
It's estimated that a 65-year-old couple who retired in 2009 would need $414,000 to be 90% certain that they could cover their medical expenses in retirement. By 2019, a 65-year-old couple might need $694,000 earmarked for health care to have the same degree of certainty.⁶ Health care may be your biggest expense in retirement, so it's crucial to account for the cost of health care when determining your retirement needs.

It may be difficult to consider all the factors that could influence how much money you will need for a comfortable retirement.

1-2: 2010 Retirement Confidence Survey, Employee Benefit Research Institute
3-4: National Vital Statistics Reports, 2009 and 2007
5: U.S. News & World Report, February 16, 2010
6: Employee Benefit Research Institute, 2009