# We’re About to Retire: How Can We Be Sure We’ve Saved Enough?

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Hoping to retire soon? Congratulations! But are you sure you’re financially ready?

Almost everyone who contemplates retirement asks themselves this question. That includes Money Talks News reader Steve:

“I am 67, and Carolyn is 63. If we both work till 70 (the plan), we will have combined Social Security incomes of over \$6,000 per month. We’ll have no mortgage and between \$800,000 to \$1 million in savings. We are stressing about retirement and would like to relax a bit. Can we?”

OK, Steve, let’s discuss.

Steve says he and his wife plan on working until they’re 70. Combined, they’ll get more than \$6,000 a month from Social Security, and they’ll have close to \$1 million in savings. So let me ask you: Will they have enough?

Answer? There’s no way to know without knowing what they plan to spend.

If you’re approaching retirement, here are two simple steps to figure out if you’ll have enough.

### Step 1: Figure out what you’ll have

Steve did a good job of guessing how much he’s going to have when he retires: about a million bucks. But here’s something he could also do: Figure out how much that could add to his income.

You can do this by dividing your total expected savings by your life expectancy. Example: Say, like Steve, you’re going to retire at 70 and expect to have a total of \$1 million in savings. You estimate your joint life expectancy is 20 years. Divide \$1 million by 20 years, and you get \$50,000 a year.

Now, Steve has a very rough estimate of how much monthly money his savings will generate, providing he’s willing to spend down his capital. Add the couple’s Social Security of \$6,000 a month, or \$72,000 a year, and Steve and his wife can expect to bring in \$122,000 a year.

Obviously, we hope Steve and his wife will be growing their savings during retirement, not simply spending their principal. This exercise is a quick, down-and-dirty computation.

Again, take what you’ll have in savings, divide it by your life expectancy, add what you’ll get from other sources, and you’ve got a quick income number to work with.

### Step 2: Figure out how much you’ll need

All things being equal, you’re probably not going to need as much income in retirement as you’re spending now. On the other hand, depending on how you intend to spend your retirement years, you could be spending more than you are today.

Either way, retirement planning means confronting your future. Are you going to be sitting on the porch or staying in luxury hotels as you travel around the world?

If you have no idea or can’t imagine how much you’ll spend during your retirement years, use the amount you’re spending now.

If you don’t know how much you’re spending now, this is a great time to figure it out. Use some sort of budgeting app — such as Money Talks News partner YNAB (You Need A Budget) — or simply write down everything you spend until you have a handle on it.

After going through these two steps, you’ll have at least some kind of idea whether you’ll have enough. Granted, this is an exceedingly simple look. You can — and should — drill down a lot more.

### The sooner, the better

One last tip: When it comes to retirement planning, the sooner the better.

There’s no reason to feel like an idiot if retirement is approaching and you don’t have enough. Plan early; you’ll have more options. Maybe you can put away more. Maybe you can get a side job and make more money. Or, maybe you can think about where you might be able to live for less when you retire.

In short, the sooner you start confronting your likely retirement reality, the better off you’re going to be.

Make sense?