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Almost half of us underestimate the amount of spending money we would need to ensure a comfortable retirement, according to a survey by insurer Metlife.
In addition many of us underestimate how long we will live after we have retired, according to the very same study.
The Metlife Retirement Income IQ Study – which was released earlier this year – found that almost half (49%) of those surveyed underestimated the amount of pre-retirement income they would need to have a comfortable lifestyle in retirement. While many thought they would need just 50% of their pre-retirement income to achieve a comfortable lifestyle in retirement, experts believed they would need 80-90%.
In addition to these findings the study also highlighted the fact that about 60% of retirees underestimate their life expectancy when they go into retirement – which puts them at risk of running out of funds.
If nothing else the survey – conducted among 56-65 year olds in the United States – showed that many of us go into our retirement years unprepared. It also showed that many of us can expect to live longer than we might think.
So what can we do to avoid becoming a statistic – as illustrated by the MetLife study. Well, to begin with we must plan. We must also realise that delaying our pension planning will have an extremely negative effect on our retirement income and lifestyle.
According to the United States Department of Labor we can expect to retire at the age of 65. According to some experts the average American male can expect to live 16 years beyond the age of 65 and the average American female can expect to live 19 years beyond the age of retirement. However, as stated in the Department of Labor’s report – entitled Taking the Mystery Out of Retirement Planning – retirees should plan to live 30 years beyond the age of 65 in order to avoid outliving their income.
With all this in mind, how much do we really need in retirement – on a monthly basis – and how do we achieve it? To begin with we should plan to withdraw and use just 4-5% of our overall savings or retirement fund per year.
At this rate with USD $400,000 of savings we would be draw anything from USD $16-$20,000 per year. With savings of $800,000 we would be able to withdraw USD $32,000 to $40,000 per annum.
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