Retire In Ten Years

AARP
Retire in Ten Years Planning ahead

You need to plan for how long you Expect to Live. While no one can plan how long they'll live, there are several ways to make an educated guess. Factors such as family history, personal health, and lifestyle will affect your estimated longevity. Some of your later years may not be as active as your early ones, but they might be just as expensive thanks to medical costs. These are important factors in planning for how long your retirement next egg needs to last.

Social Security Decisions
Many people don't realize that the earliest you can start receiving Social Security is age 62. If you choose to draw benefits at 62, you will only receive 80 percent of what you would if you waited until your "normal" retirement age.

And many people don't realize that the "normal" retirement age for Social Security is no longer 65. It is gradually moving up to age 67. If you wait until age 70, your monthly benefits will be even higher.

Some choose to defer their Social Security benefits for as long as possible to increase the monthly benefits. Others start at age 62 even though the benefits are less. Why? Because they get almost three years of extra payments that they then invest.

One other factor to bear in mind is that social security payments are funded by the present workforce to pay current retirees, as a result of baby boomers there will be more people retired than people working so the future might change.

The Inflation Factor
Like predicting how long you'll live, trying to anticipate inflation over the next 20, 30, or even 40 years isn't an exact science. But what may look like a hefty retirement account now may shrink substantially down the road because of inflation. At the moment inflation is low but is will soon rise again.

For example, let's assume that inflation increases at 3 percent a year. If you retire at age 60 on a yearly income of $40,000, you'll need $72,000 by the time you're 80 to maintain your standard of living. At age 85, or 25 years after you retire, you'll need $83,800.

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