It seems like a simple question, but many people have no idea how much they expect to receive in monthly retirement income, and most either don't know or are unsure of what their Social Security payments may be in retirement.
This lack of planning and understanding may affect more than just your happiness in retirement; it could also affect when and how you'll be able to retire. Five years before you plan to retire may be a good time to refine your retirement planning estimates and reprioritize your goals.
Where do you plan to live?
If you plan to move, make sure you also consider how that will impact your cost of living, including the cost of health care and your access to it. If you have your eyes on moving to another state, be sure you understand any differences in taxes (e.g., state, income, estate, local, sales, and property taxes) as well as differences in the cost of living. If you plan to stay put, you'll want to consider how your home equity factors into your plans.
What do you want to do?
The early stages of retirement can be an expensive time. Many people overestimate how much they'll be able to work in retirement, and underestimate how much they'll spend. Take a hard, realistic look at both fronts.
How will you pay for health care?
After food, health care is likely to be your second largest expense in retirement. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2019 may need approximately $285,000 saved (after tax) to cover health care expenses in retirement.
While many preretirees are thinking ahead and factoring health care costs into their retirement savings plan, almost 4 in 10 are not.2 In fact, 48% of preretirees estimated that their individual health care costs in retirement would be less than $100,000—far lower than Fidelity's current estimates.
If you've relied on your employer to pick up most of your health care tab, retirement could be a rude awakening: Only 18% of large companies offer health care benefits to retirees, according to a 2018 employer survey by the Kaiser Family Foundation. Although Medicare kicks in at age 65, you may need to buy supplemental insurance or, at the very least, budget for higher out-of-pocket health care expenses than you had while you were working.
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