Special Report: How Much Money Will You Need For Your Retirement?


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Today, we're introducing a new feature for readers focused on retirement money issues.

A big question that many Americans ask as they begin to hit their later years is how much money you'll need to enjoy your current quality of life during retirement.

Years ago, there was a rule of thumb that you could get by in retirement if you were able to draw about 2/3 of what your average income was during your last 5 years of employment. Unfortunately, times have changed and several factors have come in to play to push that magic number higher for many retiring workers.

With the recent hits to the real estate and financial markets, some experts estimate that the average investor has lost about 5 years worth of built-up equity in their investment portfolio holdings (stocks, real estate, CD rates, savings, etc.). The idea of things reverting back to where they were (a manic bull market) are unlikely as far as I can tell, so for the many soon-to-be retirees and those who are retired now, careful consideration is needed to build your retirement savings back up. Downsizing to a smaller home is an option, but with the real estate market in flux, the expected asking price for your current home is likely significantly lower than a few years ago. Also, you may not want to move, so you need to figure out an alternative cost-cutting solution (I know whenever I mention to my parents about coming down to live near me, they always give me the "we like where we are and we don't want to deal with packing boxes." Believe me, I've tried.).

Today's reality is that retirees will likely need anywhere from 90-100% of their average income to be able to support their current lifestyle. To calculate your expected retirement income, look at your 401K, pension plan, and Social Security projections (every year the government mails us a statement with what your estimated monthly social security payments will be) as the main sources for your revenue. Add those income sources up, and if the total is greater than your monthly expenses, congratulations - you should be OK.

But for many, the ratio of income to expenses will likely be too close for comfort. In that case, you may want to consider working longer full-time, or possibly looking for a part-time job during retirement. The psychological downer of needing to work during retirement can be off-putting, but look at the bright side: you will remain sharper in your older years, and yes, being retired can get boring fast for many people who've been used to working.

Your best bet is to do your homework and start getting your financial house in order as soon as possible. As we all know, the bills don't stop coming, so stay diligent, organized, and financially responsible, and your retirement will be a happy one.

Paul Rubillo is the founder and CEO of Dividend.com.

For a great retirement income option, be sure to visit our complete recommended list of the Best Dividend Stocks , and our new Monthly Dividend Income Generator tool.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Created by Dividend.com

This article appears in: Investing , Retirement

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