Retirement planning. It’s a phrase that sends many people into a panic, especially if they’re approaching retirement without enough savings. At cocktail parties, you might joke about working until you drop. That’s not a realistic option, and certainly not a good way to spend your retirement. You’ve worked hard your entire life. You’ve earned the right to retire in comfort. But how much do you need to do so? Many people approaching retirement can only answer with a vague number, or “a lot,” or “more than I have.”
The AARP retirement calculator helps you determine exactly how much you need, and how best to reach your goals. Read on for more information on successful retirement savings plans and how to best use the retirement calculator.
Why You Need a Retirement Plan
Saving for retirement can feel daunting, particularly if you’re behind. You might have a vague idea of the amount you need to save and feel so overwhelmed by the figure that you put off retirement savings indefinitely.
A plan can change all that. Every major life event and decision requires a plan. You might manage daily tasks with a to-do list, stay on top of your eating habits with an app, or help your child manage college applications with a planner and list of weekly goals. Retirement is the same. You achieve your goals by knocking out a little bit at a time. Over the course of months, years, even decades, you can get there.
So what should a good retirement plan be?
- Realistic. You can’t save a million dollars by next year. That doesn’t mean you should save nothing at all. The right retirement plan is realistic, taking into account your income and the time you have left until retirement. If you consistently find that your savings is falling short of what you hoped, it may be a sign that the plan you developed was too ambitious. The right planning expert can help you craft a more realistic plan.
- Informed by the market. Market conditions can change the value of your retirement investments. This is where your retirement advisor comes in. They should help you choose the right combination of investments to maximize value while minimizing risk. If you’re continually losing money, then your investments may be too aggressive.
- Adaptable. Things change. If your income goes up or down, your retirement plan should be able to adapt accordingly. Work with several potential retirement scenarios in mind so that you can adjust your plans as needed. If a sudden change in income or lifestyle has the power to destroy your retirement planning, then your plan is insufficiently adaptable.
- Based on specific goals. It’s tough to put money aside every month, especially if you’re pinching pennies to do so. The right retirement plan reminds you what you’re working toward. You need a specific figure for each of your retirement goals. When the saving gets tough, remind yourself of these goals so you can keep at it.
Tools to Use
To build your retirement plan, you need to know your goals. The following tools can help you come up with specific figures based on your needs and lifestyle:
AARP Retirement Calculator
The AARP Retirement Calculator is a comprehensive tool that looks at several figures to help you determine how much you need to save for a comfortable retirement. Spend some time gathering information about your income, your retirement goals, and the current value of your investments before you try the tool. Once you’re ready, set aside about 30 minutes.
The tool will ask basic questions about your income, marital status, and retirement goals. Next to each question, there is a question mark you can hover over to get more information about why that query is relevant. After gathering the relevant information, the tool presents you with the cost of your retirement, as well as some suggested retirement strategies.
The real value of this tool is that it gives you a realistic starting figure for your retirement. You can then work backward from this figure to determine how much you need to save and what sort of investments you should choose. Remember that with savings accounts and bonds, you’ll be benefiting from compounded interest. To determine how compound interest can grow your savings over time, use this compound interest calculator. Stocks and some other investments are more volatile, but have the power to grow more with time.
You can use the AARP calculator as many times as necessary. Consider revisiting your calculations every six months, as your savings grow. If you experience a major change in needs, your income changes, or a life event alters the amount you can save, try the calculator again with updated data.
The Arbor Company Senior Living Calculator
Luxury living is more affordable than you think. Many seniors can save lots of money by moving into senior living. Moreover, senior living may improve your quality of life, help you remain active, connect you to new friends, and ensure you always have help when you need it. For those anxious about the prospect of living alone, senior living offers peace of mind.
By offering everything under one roof — food, transportation, events, classes, and more — senior living communities are able to charge a single price. So no more budgeting for a leaky roof, for regular outings, or for grocery trips. Many seniors find that this saves them money. Additionally, you won’t have to pay for a mortgage — or utilities and similar home expenses — anymore, which allows you to redirect your money to the luxury senior community of your dreams.
The Arbor Company cost calculator poses questions about your basic expenses and needs to help you develop a monthly budget. It then shows you how the right senior living community may affect the budget. You can use the two figures to assess the cost of aging in place as compared to the cost of a luxury senior living community.
Retirement Planning Tips
If you’re not sure how much you need for retirement or how you can turn the savings you have into the savings you want, your first call should be to a retirement planner. Some people are reluctant to call experts because they fear being judged, or they worry they don’t have enough money. If you’re anxious about your savings, that’s a great reason to seek expert insight! A good retirement expert won’t shame you or judge you. Instead, they’ll work with you to develop the right plan.
Some other strategies that can help include:
- Know that saving a small amount is better than saving nothing at all. Even if you can't save enough to fully fund retirement, having a little money set aside can help float you as you transition to part-time work, or ensure you have enough to cushion a monthly Social Security check. Even if you can only save $10 a month, begin socking that money away now.
- Max out employer-matched retirement contributions.
- Know about catch-up contributions. If your retirement plan allows catch-up contributions, your annual limit increases by $6,000 after age 50.
- Get your expenses under control. This helps you save for a more frugal retirement. Moreover, the money you save can then be redirected to your retirement savings account.
- Pay down debt. Debt almost always accumulates more quickly than interest does in savings. So by paying down debt quickly, you can reduce monthly expenses and get more money in your pocket.
- Talk to a retirement advisor about the right balance of investments. Aggressive investments can gain value more quickly, but if the investment tanks, so too might your savings. The right balance ensures some money is safe, while risking other money in the hopes of a higher yield.
- Look into options to fund healthcare needs in retirement. You need a plan in case you develop a serious illness, such as dementia. Long-term care insurance may help. If your employer offers any benefit plans that might help fund senior living, consider investing now.
- Look into options for part-time employment. You can still slow down and relax in retirement, even if you can’t save enough to fund a fully unemployed your retirement. Consulting and part-time work offer a break from the daily grind, while still ensuring you have some income.
Perhaps most importantly, talk to your family and spouse about how you intend to manage retirement expenses. Moving in with loved ones, downsizing to a smaller house, and moving to an all-in-one senior living community are all options that can offer cost saving benefits.
The Arbor Company offers luxury living to seniors on a budget. Many of our residents were shocked to learn that they could eat great food, spend their day going on adventures, and live in gorgeous homes for less than the cost of home ownership. We roll everything into one price tag, saving you money and protecting you from the uncertainty of unexpected home expenses. To learn more about what we can offer, stop by or give us a call today.