Regardless how you calculate the money you need for retirement, that‘s only one piece of the puzzle. It might help to envision the kind of lifestyle you want, whether you plan to work part-time or travel, for example.
In order to have the lifestyle you want, you need to determine what’s most important to you. That should help with your calculations.
Do you want a simple retirement or a lavish one?
When you picture yourself in retirement, do you see yourself in your current home? With your current car? Are you debt-free, or will you still have items to pay off? Are you content with doing inexpensive activities, or do you want to travel the world, dine out at restaurants, or buy a vacation home?
How little or how much you want to do in retirement is the biggest factor when it comes to the money you need to be saving now. While many experts say you should set aside 10% to 15% of your income starting in your 20s, if you plan on living simply, you might not need to save 15%. On the other hand, if you plan on living large, you’ll probably need more than 15%.
Do you plan to work in retirement?
Another factor to consider is whether you want to work in retirement. If you find satisfaction and purpose from your work, it might be an important priority. Keep in mind if you are planning to supplement your CalPERS pension by working after retirement, you need to know there are specific laws governing the type, timing, and amount of work you can accept without affecting your pension. Check out A Guide to CalPERS Employment After Retirement (PUB 33) to learn more.
Do you have passive income?
Streams of income that will aid in your retirement cash flow can be a great way to afford the lifestyle you want in retirement. However, having these extra income sources does not always come stress-free. You’ll need to make sure you either have time to manage your investments or hire an investment manager to do the work for you.
Figure out what’s best for you!
These are just a few questions to ask yourself as you envision your retirement lifestyle. The main takeaway is that everyone’s retirement looks different.
If you’re interested in learning more about how to plan for your future, set some time aside to watch our Planning Your Financial Future video series. From there, our Planning Your Financial Future Checklist is a great resource to review.
Being proactive and educating yourself on retirement preparation early on will put you on the right track to achieving the lifestyle you want.