See How Long Your Resources Will Last In Retirement
Plan for a Secure and Comfortable Retirement with UMCU
Whether you've made it to retirement or are just planning ahead for your golden years, you'll want to know how long the funds you worked so hard to save will last you. Understanding the longevity of your retirement savings is crucial for maintaining financial security throughout your golden years.
Using our calculator, see just how long your savings—either existing or expected—will last so you can live comfortably in your retirement years. To get started, please have the following information available:
- Cumulative Savings: The amount of money you either have or will expect to have at the time you choose to retire.
- Monthly Spending: This is amount of funds you will need each month to cover all of your anticipated living expenses throughout retirement.
- Monthly Social Security: The Social Security benefit amount you expect to receive each month based on your average indexed monthly earnings.
- Monthly Pension: Any funds you'll receive from a retirement pension.
- Other Income: The amount you receive monthly from any additional income that is not included in the above.
- Rate of Return: The return you expect to make on your savings accounts and investments.
- Rate of Inflation: The expected rate of inflation during your retirement years. A 2-4% inflation rate is a good average for future planning.
- Marginal Tax Rate: Your tax rate as dictated by your income and tax bracket.
Common Factors that Impact Your Retirement Savings
Several factors can have an effect on your hard-earned retirement savings. But with careful planning, you can find ways to help alleviate these impacts. Some of the common factors to consider are:
Rate of Return on Savings
The rate of return on your savings balance plays a leading role in determining how long your retirement funding will last. Different savings and investment accounts offer varying rates of return, and investment returns can and likely will fluctuate over time. Typically, investments in stocks, bonds, mutual funds, and other diversified portfolios can yield higher returns compared to savings accounts or CDs, but they also come with higher risks.
A good practice is to balance your investment portfolio in a way that aligns with your risk tolerance and overall financial goals. As you age, shifting toward more conservative investments can help preserve your capital.
Taxes on Withdrawals
Understanding the tax implications of your withdrawals is critical for accurate financial planning, as taxes can greatly impact your retirement savings. The type of retirement accounts you have will dictate how your withdrawals are taxed. For example, traditional IRAs and 401(k)s are funded with pre-tax dollars, meaning withdrawals are taxed as ordinary income. Conversely, Roth IRAs and Roth 401(k)s are funded with after-tax dollars, so qualified withdrawals are tax-free.
Inflation
Inflation is another key component that will ultimately affect your retirement savings. People reaching retirement age know better than most that over time, the cost of living increases, which means you’ll need more money to maintain the same standard of living you enjoyed in your pre-retirement years. Even a modest inflation rate can begin to diminish the purchasing power of your savings over a 20-30 year retirement period.
Healthcare Costs
Healthcare costs are an important consideration for your retirement savings due to rising medical expenses and the potential for long-term needs. Consider exploring long-term care insurance, contributing to a Health Savings Account (HSA) for tax-advantaged savings, and maintaining a healthy lifestyle to reduce future medical costs. Additionally, be sure to include potential healthcare expenses in your retirement budget and explore Medicare options to ensure comprehensive coverage while managing costs effectively.
How to Make Your Retirement Savings Last Longer
After putting in so much time and effort to grow your retirement savings to a place that will allow you to live comfortably in your golden years, it's important to maintain awareness around them to ensure they last as long as possible. Here are five simple strategies to help you stretch your dollars well into your retirement:
- Regularly Review and Revise Your Budget: Stay on top of managing and tracking your spending and make adjustments where and when needed to maintain your savings over time.
- Diversify Investments: Keeping a diverse portfolio of investments can help you manage volatility and earn higher returns.
- Delay Your Social Security Benefits: If you are able to do so comfortably, delay your Social Security benefits so that you can receive higher payments later in your retirement.
- Consider Part-Time Work: Part-time jobs and side projects not only replenish your retirement funds, they can also help you stay social and active in your golden years.
- Monitor Withdrawal Rates: Pay attention to how much you withdraw each year, and seek guidance from a licensed financial advisor for a complete retirement plan.
At UMCU, we offer wealth management services to help you reap the most benefits from your hard-earned savings and find the best options for your retirement. Learn more now about our savings accounts and which ones might be right for you.
Common Questions
Ideally, you should save as much as you are able. Most financial advisors recommend saving a minimum of 15% of your gross income for retirement. However, it also depends on a few factors: how much income you earn, when you plan on retiring, what kind of retirement fund you'll contribute to, etc. UMCU has a variety of retirement calculators to help you!
It depends! Do you have a personal savings account in addition to your retirement account? Do you plan on taking an early retirement or working as long as possible? Check out our calculator to get an idea of how long your retirement planning accounts will last into your golden years.
In most cases, it's advisable to utilize an employer matching 401(k) program. Our 401(k) calculator will help you see how much you can grow your retirement account based on a few factors:
- Your annual salary
- Your annual salary increase
- Your contribution
- Your employer's contribution
- Your current age
- The age you plan to retire
There are pros and cons to each! Like with all things retirement related, there is no concrete answer. There are different qualifications for a traditional 401(k) vs a Roth 401(k), how each account is taxed, withdrawal requirements, and more.
Click here to use our traditional vs Roth 401(k) calculator.
While there are many similarities between the two retirement accounts, the biggest difference is that a 401(k) is offered by your employer while IRAs are something you open on your own. Like with traditional vs Roth 401(k)s, IRAs also have traditional and Roth accounts.
You'll need to consider several factors like your cumulative savings, how many years you will be in retirement, your tax rate, etc.
To get a rough idea of your retirement income, click here to enter your info into our retirement income calculator.
- 401(k) Plans: 401(k) plans are offered by many employers and allow you to contribute pre-tax income that your employer will often match. The funds grow tax-deferred until withdrawal.
- Roth 401(k): Contributions are made with after-tax dollars, but withdrawals during retirement are tax-free. Roth 401(k)s are beneficial if you expect to be in a higher tax bracket once you reach retirement.
- Traditional IRA: Contributions are often tax-deductible and your investments grow tax-deferred until you withdrawal. Traditional IRAs are a good option if you don’t have access to a 401(k).
- Roth IRA: Contributions are made with after-tax income, but withdrawals are tax-free. Please note that there are income limits for contributions, but it offers tax-free growth and withdrawals.
- Health Savings Account (HSA): If you have a high-deductible health plan, an HSA can be a dynamic retirement savings tool. Contributions are tax-deductible, grow tax-free, and withdrawals for medical expenses are also tax-free.
- Simplified Employee Pension (SEP) IRA: SEP IRAs are a great choice for self-employed individuals and small business owners. Plus, they allow for higher contribution limits compared to traditional IRAs.
- 403(b) Plans: A 403(b) plan is a retirement plan offered by public schools and certain 501(c)(3) tax-exempt organizations for their employees. It's similar to a 401(k) plan maintained by a for-profit entity. Employees defer some of their salary into individual accounts, and the funds are generally not subject to federal or state income tax until it's distributed.