Saving for Retirement

Is Retirement on the Horizon? Pinpoint Your Target Date

Establishing a targeted retirement date helps you create a plan that fits your lifestyle

Image of happy older couple "Is Retirement on the Horizon? Pinpoint Your Target Date"
 

If you're nearing retirement, say 5-10 years out, knowing exactly when you want to retire can have a major impact on your current savings and investment plans. A few key factors to consider: What kind of retirement do you want? How much will your retirement cost? What is your current amount of savings? This worksheet can help determine a retirement income plan that fits your savings, lifestyle and goals. You can start by visualizing the type of retirement you want.

  • What kind of retirement you want. Not all retirements are created equally. Whether you want to enjoy the simple life at home or travel the world will impact your retirement plan.
  • How much your retirement will cost. Establishing a retirement budget is similar to the household budget you have now, with a few key assumptions and adjustments.
  • Your current amount of savings. After getting a grasp on your current savings and investment strategies, you may want to consider fine-tuning your plan.

1. Visualize your retirement

Think about your retirement. Discuss it with your partner and/or your family. What does it look like? What do you expect to be doing on an average day? What are you hoping to experience over the years?

2. Determine your retirement income plan

During retirement, you will need income just as you do now. That money will come from a variety of possible sources, including Social Security, pension plans, retirement savings accounts and investments. Many keep working in some capacity beyond their traditional retirement date, in which case retirement income is bolstered by a continuation in salary.

To target a retirement date, you need a general idea of how much of that money you will want to spend in retirement each year. A projected budget can help.

3. Monthly expenses:

Home:
Rent or mortgage payments $ _____
Utilities $ _____
Property tax and insurance $ _____
General household maintenance $ _____
Total $ _____

Everyday Expenses:
Food $ _____
Household supplies $ _____
Clothing $ _____
Personal care products $ _____
Gifts $ _____
Total $ _____

Transportation:
Car payments $ _____
Car registration taxes, fees and insurance $ _____
Maintenance and fuel $ _____
Other transportation $ _____
Total $ _____

Health:
Medicare/supplemental insurance $ _____
Medications and medical supplies $ _____
Co-pays and out-of-pocket payments $ _____
Dental $ _____
Gym/health club membership $ _____
Total $ _____

Travel and Entertainment:
Travel $ _____
Dining out $ _____
Entertaining $ _____
Hobbies and Activities $ _____
Total $ _____

Miscellaneous:
Other insurance costs (long-term care insurance) $ _____
Other debt $ _____
Other expenses $ _____
Savings contributions (for emergencies or one-time purchases) $ _____
Total $ _____

Monthly Total $ _____

Annual Income Required $ _____

Tip: This can be a tough estimate if retirement is far away, so aim to replace about 80 percent of your pre-retirement salary in your first year of retirement.

Keep in mind: Some of these costs will increase over time, some will decrease and some may be eliminated entirely.

4. Take stock of your current retirement savings

Now that you have an estimate of how much you’ll likely need, it’s time to determine how much you have in your savings right now, how much you contribute each month and your annual rate of return.

Consider the following sources of income:

  • 401(k)
  • 403(b)
  • IRA
  • Roth IRA
  • Investment accounts
  • Liquid accounts (checking or savings)
  • Additional income sources

An advisor can help you get a clear understanding of where you are on your savings and investments.

5. A big consideration: Social Security

For most people, Social Security provides more than half of their retirement income.

Your retirement date will invariably be influenced by Social Security, because retiring earlier than age 67 and starting to collect Social Security can mean a significant reduction in your monthly benefits over the rest of your life.

You can retire and receive Social Security benefits as early as 62; however, your monthly benefits will be reduced to 70 percent of the full amount. Each month you wait, you earn a small percentage more. See below:

How your Social Security benefit is reduced1

If you start getting benefits at age*

Wage Earner: The Retirement Benefit you will receive is reduced to

Spouse: The Retirement Benefit you will receive is reduced to

62 70% 32.5%
63 75% 35%
64 80% 37.5%
65 86.7% 41.7%
66 93.3% 45.8%
67 100% 50%

*If your birthday is on the 1st of the month, the benefit is figured as though your birthday fell during the previous month.

Tip: Claiming too early means reduced income, but claiming too late may mean living on a tighter budget during your most active and healthy retirement years. A financial advisor can help you decide what will work best for you.

6. Consider different scenarios

Even though 5-10 years doesn’t seem like a long time, a lot can change between now and your retirement date, so it’s important to compare a few options. An advisor can also help you understand what it takes to retire at different ages.

Check in on your retirement goals

Consult with an advisor to learn how SunTrust can help you prepare for retirement.

1 “Full Retirement Age: If You Were Born In 1960 Or Later,” Social Security Administration

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

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