Planning for retirement involves a little number-crunching.
You may know your cholesterol number or blood pressure. You have a pretty good idea of your weight and height. You probably even know the mileage on your vehicle. But do you know the numbers that will help you plan for your future?
How long will you live?
Life expectancy at birth in 2015 was 78.8 years. Currently, a 65-year-old man can expect to live another 18 years, whereas a 65-year-old woman can expect to live another 20 years. Click here to see the U.S. life expectancy table.
Are you prepared for retirement?
Many ministers are unprepared for retirement; 27% have no retirement savings at all. Among those ministers who have begun to save for retirement, 50% have less than $19,000 saved—not enough to provide for years of retirement. In addition, 86% of AG ministers have some form of debt, whether mortgage, school loans, medical, or credit card. These statistics and more can be viewed in Dr. George O. Wood’s article, click here to read.
There’s more to preparing for retirement than just saving. Retirement planning involves getting all of your finances in order, including paying off debts.
How much do you need to save?
Many financial experts suggest saving up 10 to 12 times your annual salary for retirement, but there’s no one-size-fits-all rule. A commonly used percentage of your current salary needed to live comfortably in retirement is 70%. For example, if you made $100,000 a year before retirement, with most calculations you would be able to live comfortably on $70,000 a year during retirement. Click here to estimate what you may need based on your own situation.
Keep in mind that while some living expenses will decline, such as having a home paid off, other costs such as medical expenses generally increase with age. Even with health insurance, a married couple in their 60s could end up spending over $285,000 on out-of-pocket medical expenses over the course of their retirement. Other costs such as travel, ongoing home maintenance, long-term care or nursing home expenses, can quickly add up. Don’t forget that retired ministers may benefit from continuing a housing allowance tax deduction on their 403(b) distributions which can potentially offset other expenses and reduce tax liability (click here to view the housing allowance worksheet). It’s essential to consider what factors are important to you, and have funds set aside for those events.
It’s never too early to begin preparing for retirement. Long-term financial management can help you enjoy retirement based on your numbers. Take action today. Email us to learn how we can partner with you.