People entering retirement will need 70 to 80 percent of their current annual gross income to maintain their lifestyle, according to the Social Security Administration. Benefit payments from Social Security usually will pay about 40 percent of the total, according to the agency. That means a person earning $40,000 a year will need at least $28,000 a year in retirement, with Social Security paying roughly $16,000.
Social Security states that many retirees will receive about 40 percent of their preretirement income, but that is not a guarantee. People who missed some years working may not receive as much in retirement, for example. People who are planning retirement can visit the Social Security Administration offices in their town to discuss projected benefits. Online retirement calculators are also available on the Social Security Administration’s website.
People who have not saved enough for retirement have some options. One strategy is to scale back their lifestyles to match projected payments from Social Security, pensions and other retirement savings. That means a person who was earning $40,000 a year might have to adjust to living on an annual income of only $20,000.
Some people who do not want to change their lifestyle may simply decide to work longer. Some people may choose to work well into their 70s, for example. Working while gradually making cutbacks and changes to lifestyle could allow you to save more for retirement or to adjust to living on 40 to 50 percent of your preretirement income.
Planning for life expectancy is another important consideration in retirement. People who are 60 years old and contemplating retirement could easily expect to live 20 to 30 years longer, if they are in excellent health. Social Security and most pension plans pay benefits until you die. However, people who are supplementing their retirement with personal savings should confirm they have enough cash to last well into their 80s or even 90s.
Expenses related to health are also a factor. Some people require nursing home care later in life, and may spend years at the facility. Nursing home care is expensive, costing several thousand dollars a month, and should also be considered during retirement planning.
Robert Lee has been an entrepreneur and writer with a background in starting small businesses since 1974. He has written for various websites and for several daily and community newspapers on a wide variety of topics, including business, the Internet economy and more. He studied English in college and earned a Bachelor of Arts in liberal arts from Governor's State University.