How to figure out how much you need to retire

57% of working Americans feel behind on their retirement savings, according to a recent Bankrate survey. Christine Benz, Morningstar director of personal finance and retirement planning, joins Wealth! to discuss how you can best plan for retirement. “As retirement approaches, as you hit the threshold of maybe age 50, start putting pen to paper about how you think your budget may change in retirement because inevitably it will change a little bit. You may have fewer commuting costs. You may not need clothes to go into the office. So take a hard look at that. Maybe you’re mulling some sort of relocation or downsizing that’ll definitely improve your budget. So look at your planned spending. Look at what Social Security will provide you. If you are among the shrinking share of the population that will have a pension in retirement, look at what your pension benefits might be, and then do some math around your retirement savings adequacy,” Benz advises. She explains that living on 4% of your portfolio is typically viewed as sustainable over a 25-30 year period. She emphasizes the importance of de-risking your investment portfolio to protect against market downturns. One way to do this is to take money out of stocks and move it into bonds. Outside of saving for retirement, she encourages people to think about their life goals and purposes. “So those might be really aspirational things that you want to achieve during your lifetime. So like climbing a mountain or writing a book or starting a foundation. So think about those one or two things that are huge to you that you want to try,” Benz says. Alongside some of those big goals, she emphasizes the importance of smaller purposes that “animate us and give us joy every day.” She explains, “maybe it’s just being a great partner to your spouse or a wonderful parent, or you know that you love to watch birds or cook or run marathons.”
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