“We were told by our first financial advisor that we, with no children, will need $2 million to retire 'comfortably,' with the same standard of (middle class) living," says Moore. Moore and her husband had hoped to retire in 10 years, at age 60, but now realize they may need to wait if their retirement savings are insufficient, “particularly considering the age at which you can get Medicare and the likelihood that the 401(k) situation may change," she says.
Factoring in the future costs of health care, which are likely to increase—plus the possible need for long-term care (whether in a skilled nursing facility, assisted living or aging in place)—can be an eye-opener for many clients, says Debbie Heffernan Gallant, a CFP, ChFC, RLP in Rockville, Md. Here are three keys to consider.
1. How much do you need?
Some Americans put off retiring because they “don't know how they'll spend their time and what kind of resources they'll need," says Gallant. Others, unfortunately, may be forced to leave the workforce before they are ready, due to declining health or changing economic conditions.
It's never too early to start thinking about how you'll afford retirement.
A first step in developing any retirement plan is to think about what you want your life to look like once you've retired. What kind of lifestyle do you desire? Where will you live? What kinds of activities are you looking forward to?
Picturing your future life in retirement helps determine how similar or different your expenses will be from your current lifestyle. That, says Gallant, then determines how much money you'll need to retire.