The thought of retirement may seem like a long way off. On the other hand, if you’re close to retirement age, you may be wondering if you’ll have enough savings to live comfortably. The good news is that your living expenses in retirement are estimated to be 55 to to 80 percent of what they are before retiring. However, managing your money wisely in retirement will still require a budget. You can begin to outline what your retirement budget will look like by considering these seven important costs of living.

Housing

Even among retirees who down-size from single-family homes to condominiums, housing expenses will require about 25 percent of your retirement budget. Besides mortgage or rent payments, consider that you will also have property taxes, homeowners’ insurance, association (HOA) fees and private mortgage insurance (PMI) if required.

Healthcare and Insurance

The saying goes that for the first half of our lives, we spend our health to make money; and the second half of our lives we spend our money to get our health back. Consider that about 15 percent of your retirement funds will go toward health insurance premiums and healthcare costs because even those who live healthy lifestyles find they need healthcare and health insurance in retirement.

Travel

Although you may not plan to travel the world, you are likely to travel in retirement, even if just for an occasional change of scenery. Bus tours, airfare, hotel accommodations and meals out may account for about 5 percent (or $5,000 of every $100,000) of your retirement living budget.

Entertainment

Spending on entertainment will account for another 5 percent of your retirement budget. This may seem like a low dollar amount (about $200 per month) but remember that seniors often are eligible for discounts or free entertainment perks that they didn’t get before retirement. So, $200 a month per person should go a long way for entertainment.

Emergencies and Repairs

We don’t like to plan for them, but emergencies and repairs tend to occur at least a few times a year. Appliance replacement, automobile repairs or a leaky roof may suddenly become a priority that requires cash. Have it on-hand in retirement by budgeting at least 5 percent for emergencies and repairs.

Legacy

In order to leave behind sufficient resources to your spouse, children, grandchildren or to a charity, you will need to budget for about 15 percent of your retirement income. Using the 15 percent figure, for every $100,000 you plan to leave as a legacy, you need to have about $675,000 in retirement savings.

Taxes

While some states may be more tax-friendly for retirees than other states, paying taxes in retirement is inevitable. You may be required to pay taxes on retirement income such as Social Security benefits, IRA and 401k withdrawals, interest income, annuities and pension income. Some states also collect annual taxes on cars and boats. If federal, state and local taxes aren’t withheld from your retirement income sources, making quarterly tax payments may be necessary.

Could you use some assistance mapping out your retirement savings plan? An excellent resource is an experienced accountant like those at Donohoo Accounting Services. Schedule your retirement savings consultation with Donohoo by calling 513-528-3982 or email us today. And don’t forget to check us out on Facebook, Twitter or LinkedIn for our latest updates!

The days go by slowly, but the years go by fast … that’s how it is with saving for retirement. While it may seem like it doesn’t matter if you begin saving “tomorrow,” one day you may be surprised to discover that years have passed. Will you have saved what you need to live comfortably in retirement? No matter which season of your life you’re currently in, you can do it! Call them targets, milestones or goals, but aiming at various levels of savings by certain points in your life is the best way to stay on track with your retirement savings.

Early Bird

The earlier you can begin saving, the better off you’ll be in the long run. Whether you begin saving for retirement in your early ’20s or a little later, the first goal to reach lies about age 30. By that time, you should have saved an amount equal to your first year’s salary. You can achieve this milestone by systematically saving 10 percent of your salary in your employer’s 401(k) or other retirement savings plan. Additionally, during this time, begin eliminating any student debt or other long-term debt you may have.

Level Up

To remain on track, when you are between the ages of 35 and 40 you should have retirement savings that total the equivalent of two times your beginning salary. It’s also an excellent idea at this point to consider ramping up your retirement savings contributions from 10 percent to 12-15 percent. Although the increase in saving doesn’t seem like much at the outset, those “little bits” will add up by the time you reach the next level of savings. If you find yourself behind and in need of catching up, consider saving additional retirement funds. Look for ways to either increase your income, reduce your expenses – or both – and save the difference.

Critical Mass

As you enter your ’50s, retirement may seem closer than ever. But don’t let that slow you down in continuing to save. The time between ages 50 and 60 are a critical time for retirement savings. By your early ’50s, amassing somewhere between four to eight times your annual salary is a great place to be (depending on your income level, lifestyle choices, budget goals and the amount of time you have left to save). Furthermore, this is also a great time to stretch your retirement savings dollars by making catch-up contributions and working as long as possible. Retiring a year or two later than you’d like can make a significant difference in your retirement income. For example, each year worked beyond age 60 means eight percent more in Social Security benefits.

Using this timeline, you can begin paving the way to retirement with more savings than you may have thought possible. Wise counsel from experienced professionals can help you map out your retirement savings plan. An excellent resource is an experienced accountant like those at Donohoo Accounting Services. Schedule your retirement savings consultation with Donohoo by calling 513-528-3982 or email us today. And don’t forget to check us out on Facebook, Twitter or LinkedIn for our latest updates!