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How much money do I actually need to retire?

Vicky Warren · December 26, 2019 · 3 min read

how-much-money-do-i-actually-need-for-retirement

Retirement planning is not a one size fits all deal. Fortunately, there are several rules of thumb to consider when planning a retirement budget.

A couple of examples include the “Multiply by 25 Rule” and the “80 Percent Rule”.

To use the Multiply by 25 rule, determine how much money you want each year during retirement and multiply it by 25. If you want $40,000 to spend each year, you’ll need $1 million in your retirement portfolio.

The 80 percent rule states that you’ll need 80 percent of your current annual income to have a comfortable post-retirement lifestyle. If you make $100,000 now, you’ll need $80,000 a year during retirement.

These simple examples have many factors to consider. When you’re serious about retirement planning, get the advice of a financial advisor to make a personalized plan.

Let’s discuss several factors that play into a retirement budget.

Housing/Accommodation

For some, retirement is the perfect time to go on the adventures they didn’t while working. Others look forward to slowing down and enjoying a simpler way of life. Either way, you’ll still need a place to stay, and it’ll likely be one of the higher expenses in retirement (unless you have your housing paid for). Consider how you want to spend your retirement years and where you’ll live.

You can get an idea of future housing costs by looking into things now. For example, if you plan to travel or move abroad, seek out articles that break down living costs in other countries. If you plan to stay closer to home, think about if you’ll downsize into a smaller house, rent or move into a retirement friendly neighborhood. It’ll take some research, but thinking about housing costs now will help you plan for retirement.

Healthcare

Many of us assume that Medicare will cover most of our costs. That’s unfortunately not the case. Medicare Part A, which covers some hospitalization, is free, but you have to pay premiums for Medicare Part B (physician care), supplemental insurance, and prescription coverage in addition to other out-of-pocket costs.

When you combine all of this together, Medicare will only cover about 50-60 percent of your healthcare costs. As time goes on, premiums and out-of-pocket costs will likely increase to match inflation.

To get an estimate of what you may expect to pay in the future, check out this health care cost calculator by HVS Financial.

Health Savings Accounts (HSA) Can Help with More Than Just Healthcare Savings

A Health Savings Account (HSA) can be used to pay for qualified medical expenses. However, once you hit age 65, you can use the money for other expenses too!

You own your HSA, even if you received the account as an employer benefit. It stays with you and can grow for years. In order to contribute, you must be enrolled in a qualified High Deductible Health Plan (HDHP). If your situation changes and your not currently enrolled in an HDHP, you can let the HSA funds grow. HSAs don’t have a specific age when you have to begin withdrawing funds. You can leave your money in the account as long as you want. Due to the tax advantages HSAs offer, they are a great way to save for retirement healthcare costs and other expenses!

Vicky Warren

Vicky Warren

Vicky Warren, once a nurse, now a freelance healthcare writer and social media coach.

piggy bank on pink background

Benefits

2023 and 2024 HSA Maximum Contribution Limits

Lively · May 16, 2023 · 3 min read

On May 16, 2023 the Internal Revenue Service announced the HSA contribution limits for 2024. For 2024 HSA-eligible account holders are allowed to contribute: $4,150 for individual coverage and $8,300 for family coverage. If you are 55 years or older, you’re still eligible to contribute an extra $1,000 catch-up contribution.

comparing hsa versus fsa

Benefits

What is the Difference Between a Flexible Spending Account and a Health Savings Account?

Lauren Hargrave · February 9, 2024 · 12 min read

A Health Savings Account (HSA) and Healthcare Flexible Spending Account (FSA) provide up to 30% savings on out-of-pocket healthcare expenses. That’s good news. Except you can’t contribute to an HSA and Healthcare FSA at the same time. So what if your employer offers both benefits? How do you choose which account type is best for you? Let’s explore the advantages of each to help you decide which wins in HSA vs FSA.

Benefits of HSA employer matching

Health Savings Accounts

Ways Health Savings Account Matching Benefits Employers

Lauren Hargrave · October 13, 2023 · 7 min read

Employers need employees to adopt and engage with their benefits and one way to encourage employees to adopt and contribute to (i.e. engage with) an HSA, is for employers to match employees’ contributions.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.

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