We’re all looking for the magic number that will ensure financial security in our golden years, but the truth is there’s no right answer because everyone’s situation is different.
How much is needed to retire at 60 depends on a variety of factors, including your current assets and income sources, your living expenses and personal goals, the cost of healthcare in your area, as well as the number of years you have until retirement.
In this article, we’ll examine the most important factors to consider, and explain how much money for retirement by 60 is needed.
Let’s get to it…
How much do I need for retirement at 60?
In your 20s, CNBC proposes that saving only $25 a month is good for a start. But, in your 30s, you should be saving 15% or more annually to retire comfortably at 60 years old.
According to the Federal Reserve's recent data, the average median retirement savings in the US is $65k, and this figure is estimated to reach an average of $255k by retirement.
The estimated average savings at age 60 can easily fail to meet your needs in the long-term — considering inflation, your lifestyle needs, and other unforeseen expenses.
While you are saving money in a 401(k) or IRA account, try increasing the amount you're saving by 3% every time inflation increases by 2%. This will help you reach your goal faster — and it's one of several steps suggested by experts from the Joint Retirement Board for Conservative Judaism (JRB).
A few extra years of work can also increase how much you can set aside. For example, working until age 62 instead of retiring at age 60 allows you to contribute an additional $15,000 per year into your retirement accounts and still take advantage of tax breaks.
Are you a high earner and wondering, "Is $3 million enough to retire at 60?" Don't worry. We can help you find out. To avoid all the stress of these mathematical estimations, you can use an affordable financial planning service like the Interactive Wealth Advisors for the most effective financial plan for your retirement.
Can I retire at 60? Case study:
Joan has $75,000 in savings. She plans to retire at age 60 and wants to live comfortably on $40,000 a year. She expects to live until age 87 and wants to leave her money behind for her children when she dies.
Joan will need to save $7,692 per year (the difference between what she has saved and what she needs). If Joan starts saving at age 30 instead of age 20, it will take her 13 years longer (until age 43) to reach her goal.
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What you should consider when saving for retirement at 60?
After retirement at 60, you may be tempted to relax and enjoy life. However, many factors in spending should be taken into consideration:
Healthcare costs are likely to increase with age. You should consider the amount of money that will be needed to pay for the expenses in the next 20 years or so before retirement.
Social Security benefits
Social security benefits are calculated based on your past income and contributions to the Social Security fund. If you have not contributed or earned enough money during your working years, then you may receive less than expected upon retirement.
Long-term care insurance
If you want to continue living independently in your own home after retirement, then long-term care insurance is a must-have. This type of insurance covers nursing home costs as well as other care services needed by people suffering from chronic illnesses or disabilities.
Your state pension will provide a regular income after retirement at 60, but this could be as little as $10,578 per year if you've never paid into a private pension scheme and haven't earned enough throughout your working life.
The amount will increase each year by 3%. You can also take part in workplace pensions — these are called defined contribution plans because they specify what percentage of pay goes into them each month rather than.
What will your life look like at 60?
The question "How much money is needed to retire at age 60?" is frequently asked to determine the changes in lifestyle that may occur. Here is a preview.
Life after 60 has a lot to offer. You have time on your hands and you can do whatever you want to do. You have the freedom to travel, explore the world, and try new things.
However, this kind of lifestyle requires money. If you are planning to change your lifestyle after 60, then you must know how much money you will need. Let's see what different types of lifestyles will cost you:
- If you want to travel around the world, it will cost you somewhere between $20k and $50k per year. This includes airfare, accommodation, and other expenses like food and entertainment.
- If you are planning to move into a retirement home or an assisted living facility in your neighborhood, then it will take approximately $3,000 per month for these services including room rent and meals served by the facility staff.
- If you want to live independently in an apartment building with other people who are also retired or elderly, then it would cost around $2,500 per month including utilities and maintenance fees paid by everyone as a community service fee.
Taxes to consider when retiring at 60
The taxes after retirement at 60 differ from taxes before retirement. You may be able to take advantage of some tax deductions and credits that were not available before you retired.
To begin with, you must pay income tax on your pension and any withdrawals from tax-deferred investments (such as traditional IRAs, 401(k)s, 403(b)s. Similar retirement plans, as well as tax-deferred annuities in the year you receive the funds – are not left out.
How much overall retirement income you and your spouse earn, as well as whether you file joint or separate tax returns, will determine whether you have to pay such taxes.
In the 2021 IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits, you can see the base income numbers. The taxable portion of your benefits is usually proportional to your overall income. Depending on your salary, this can be anywhere from 50% to 85%. If you're married but file separate returns, there's no tax advantage at all.
Is a million dollars enough to retire at 60? After taxes, this figure might not be so bad.
What are your Social Security benefits?
Social Security is the primary source of income for many retirees. For that reason, it's important to understand your options and consider how you can maximize your benefits.
Here are some benefits 60-year-old retirees can get from Social Security:
- Retirement benefits.
If you're 62 years old or older and have worked long enough to qualify for retirement benefits, you'll receive them automatically when you reach full retirement age (which varies depending on your year of birth). If you don't qualify yet, it's not too late to start building up credit toward your future benefits. You only need 40 credits (about 10 years) of work history to qualify for retirement benefits (10 years if you're disabled).
- Disability benefits:
If you become disabled before reaching full retirement age, Social Security will pay disability insurance (SSDI) until age 65 or until you reach an earnings threshold ($816 per month in 2019).
Health Care spending
The cost of medical care for the elderly is increasing at an alarming rate.
The main reason why it's important to plan for post-retirement healthcare costs is that it is pretty expensive and can leave a big hole in your budget.
One way to save money on health care costs after retirement is by purchasing supplemental insurance policies that will cover some or all of your medical expenses after age 65. These policies can be purchased through your employer or an independent broker or directly from an insurance company.
3 ways to catch up on your retirement savings
There’s one secret on how to retire early at 60 - planning!
- Start saving early. Find a plan that won't take too much out of your paycheck and one that is safe. If possible, invest in a 401k or IRA. These are always good options.
- Make sure you invest wisely: Find something that will grow your capital but don't put too much at risk. Get the best services on Investment management in Portland, OR.
- Get out of debt: Finally, if you have debts or other things holding you back, try to fix them first. Secures your savings from regular bills and debt.
In this article, we have shown you the tools and knowledge to help you reach your retirement goal. You’ve seen that saving money can be fun, easy, and even automatic with a Lifetime Plan.
To get the best advice on efficient strategies to reach your retirement goals, feel free to reach our team of Interactive Wealth Advisors, today.
Now it's time to realize your dreams! Wish you all the best on your journey toward retirement!