Personal Finance: One-Third of Soon-to-be Retirees Have No Idea How Much Money They Will Need

Most people do not factor in inflation on their retirement lifestyle, and, as a result, often end up retiring based on an outdated budget.

When it comes to saving, most of us would rather focus on building up a reservoir of savings rather than actually counting up the pennies. The result? About a third of people close to retirement have no idea how much money they will need for retirement or if they have enough saved to go ahead and retire. According to a survey conducted by Allianz Life Insurance Company of North America, most retirement savers prefer to “concentrate on the accumulation phase” rather than actually start planning for retirement. According to Allianz vice president of consumer marketing and solutions Katie Libbe, however, when you reach the ten-year marker, you need to adjust your savings strategies and evaluate how much more you need to save – and where it is going to come from[1].

Libbe explains that many retirees underestimate the cost of inflation and taxes on retirement. This creates serious problems for those operating on plans that they developed decades ago and have stuck to ever since. While we want to have faith in our systems, if we do not reevaluate them from time to time we could end up short – particularly if we enjoy the longer lifespans most of us can now expect. “If you live longer [after retirement], inflation eats away more of your cost of living and lifestyle,” warns Libbe, adding that longer lifespans also equate to more exposure to market volatility. At today’s rate of inflation, a loan of bread will likely cost around five dollars in 2022, a fact that could have serious budgetary impact on today’s retirees.

Are you prepared for retirement? What is your strategy?

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