Reaching retirement is one of life’s major milestones, no doubt you’ll already have some ideas about how you hope to spend yours.
You may want to travel the world, start a new hobby, or simply relax and settle in one place close to friends and family. Whatever your dream retirement involves, knowing how much money you need to ensure you have “enough” to support your lifestyle can be a challenge.
Here’s how to figure out what would be enough for your retirement, and how a financial planner could help.
How much is “enough” for your retirement will be unique to you
Figuring out whether you’ve saved enough for retirement can be difficult, as the amount you need will be unique to you. There’s no “one size fits all” figure.
Read more: What can ancient philosophers teach you about the concept of having “enough”?
You likely have a list of things you wish to do when you eventually stop working, be it a no-expense-spared trip of a lifetime, or spending more time with your loved ones.
Whatever’s topping your bucket list, each activity comes with varying costs. A series of five-star vacations, for example, will likely cost more than taking up a new hobby.
So, planning your future finances around your retirement goals could help guide you towards understanding how much you need to save.
While you may worry about saving too little, you might also save too much for retirement
When you’ve figured out how you expect to spend your time in retirement, you’re ready to step ahead and calculate how much would realistically be “enough” to support your preferred lifestyle.
That said, there’s a fine balance between enjoying the fruits of your labour, and building long-term financial security.
Most people fall into one of three categories:
1. Too little
If you fall into this category and don’t make significant changes to your financial situation, you may not be able to enjoy the retirement you desire.
Not having enough saved could result in considerable emotional and financial difficulties for you and your loved ones.
2. Too much
Yes, you can actually save too much for retirement.
While it may sound counterintuitive, having too much money for retirement may present several issues.
If you’re overly concerned about whether you have enough to last through retirement, you may be reluctant to spend your wealth on the things that would leave you feeling fulfilled.
Not only that but your loved ones may face significant tax issues when you pass away, as you might risk leaving a sizeable Inheritance Tax bill.
3. Just right
You may fall into this category if you have enough money to reach your retirement goals, but just haven’t realised it yet.
Read more: Could you be closer to achieving your retirement goals than you thought?
Here, a long-term, goal-orientated plan could help you reap the rewards of a lifetime of work, and you shouldn’t have to worry about running out of money during the next phase of your life.
A financial planner could help you understand how much is “enough” for you
Defining how much is “enough” can be complicated, especially if you’re an expat. We can help you to define your goals and create a plan that enables you to achieve them.
Plus, we can help you accurately model your retirement spending with cashflow planning.
To start, we’ll consider data about how much wealth you already own, such as the value of your investments, property, and any cash savings you might have. Then we’ll take your monthly income and expenses into account.
From this information, we can build an accurate forecast of how your finances are likely to change over time to see if you’ll have enough to achieve your retirement goals.
If the data shows that you might have a shortfall, you have time to alter your financial plan accordingly. For example, you could raise your risk tolerance when investing, as doing so may help you to achieve stronger returns.
We can also help you to feel confident that you’ll have enough money to cover your living expenses for as long as you need to without running out of funds later in life.
Find out more about cashflow planning here.
Ultimately, working with a financial planner can give you much greater peace of mind, because you’ll know that you have enough wealth to enjoy the retirement you want.
