Over your working years, your main goal is to save up enough for retirement. It is likely that you will need at least 70-80 percent of your pre-retirement income per year to maintain your standard of living during retirement.
The basic formula to calculate the amount you’ll need looks like this:
(average annual income over the 10-year period prior to retirement) x .70 = bottom of range
(average annual income over the 10-year period prior to retirement) x .80 = top of range
Other factors can dictate how much money you’ll need for retirement, such as mortgage, children’s education, and health care. If you have your mortgage paid off and your children are through college, you may require less money in retirement.
Health care costs also need to be considered. Health care costs may use up a greater portion of your retirement income. Another cost to consider is how much you plan on spending on leisure activities, such as entertainment, hobbies or travel.
There are many factors to consider when you estimate your retirement income needs. The best plan is to start saving early.