How do I know my husband and I are saving enough for retirement? Is there a formula to use as a guideline?
We currently have an Annuity, some savings, and few investments, but I always wonder if we could be doing more. Neither of us are big risk takers.
Answers | 4
The second category is for advanced medical care. The average 65 year old couple will spend $250,000 in today's dollars in out-of-pocket expenses for advanced medical care. If you aren't yet age 65, remember to account for inflation between now and when you will be age 65. While the long-term average rate of inflation is around 3.5%, healthcare costs have been increasing at about 6%.
Remember that your retirement is likely to be 20-30 years long. That's so much longer than your grandparents or even your parents had. This is one time where using your ancestors as role models for retirement planning might not be a good idea!
We recommend "Balancing your Balance Sheet" approach for solving this goal. In other words, one should frame the equation for matching your assets (investments) to your liabilities (retirement income needs) to solve for identifying the targeted return needed to fund your Retirement Income Replacement Rate (RIRR) (or the income you will need to retire comfortably).
As it relates to your risk profile mentioned(not big risk takers), I would mention your risk is not capital market volatility (market value fluctuation) but rather not having enough assets accumulated to fund your the amount of income you will need in retirement. Volatility can be your friend in adopting a dollar cost averaging strategy with equal salary deferrals to a 401k, IRA or any investment accounts. The key is to refrain from market timing and maintaining a globally diversified portfolio designed to meet or exceed the targeted return needed to achieve the RIRR goal!
Best of luck.