Every year, more Americans decide to leave the workforce. Since the pandemic hit in 2020, people have been retiring earlier. At the same time, more people are plotting their retirement. One of the biggest things to think about before leaving the workforce is how big a retirement fund needs to be.
According to CNBC, most Americans think that they need about $1.9 million in their retirement fund before they can call it quits for good. However, one financial expert says that’s not how people should be looking at things. Chris Hogan wants people to know that retirement isn’t a one-size-fits-all situation. Every worker and their family will have a different idea of what retirement looks like. As a result, they’ll need to tailor their nest egg to their future plans.
For instance, someone who planned to retire and live a simple life at home would need a smaller retirement fund than someone who plans to travel the globe.
Chris Hogan, Radio Host & Financial Expert, Speaks on Retirement Funds
First and foremost, Hogan wants people to look at retirement and the funds it takes to do so correctly. Most importantly, he says, people must remember that “Retirement is not an age. It’s a financial number.” So, you can retire at any age as long as you have the money to carry you through the rest of your life. Then, he explains how to plan for retirement.
Before deciding how much money needs to be in your retirement fund, Hogan says you have to make a plan. “Be very specific about what you want [retirement] to look like. What are you willing to do? What do you want to do? How much are you traveling? How much are you working?” Being honest about those things, he says, is key. This will allow prospective retirees to get a better grasp on how much money they’ll need.
However, planning a retirement fund isn’t just about living the dream. Five key variables determine how much retirees need to put back before leaving the workforce. First, you have to take inflation into account. Right now, America is seeing record-high inflation. That’s something that retirees need to plan for. Additionally, retirees need to take the cost of living in their area into account. Most people retire at an advanced age. As a result, they also have to figure in the cost of healthcare. Many retirees will get Social Security benefits. Planning when to take those benefits and how much they will be is another important factor. Finally, retirees have to be honest about the lifestyle they want after leaving the workforce.
Those things will allow retirees to understand how much money they will need to spend to live the life they want. This will give them a better idea of how much they need to put in their retirement fund.