Answering Retirement’s Most FAQs

In order to ensure a relaxing and secure retirement, planning ahead is key. It’s something we all know, but let’s face it — figuring out where to start can be daunting. That’s why the Indexed Annuity Leadership Council (IALC) compiled and answered some of the most frequently asked questions when it comes to planning for retirement.

How much do I need to save for retirement?

As life expectancies continue to rise, more money is needed for retirement to cover everyday costs. A general rule of thumb is you should aim to save 10 to 15 percent of your annual salary. However, how much you should save for retirement depends on your personal goals and how you envision spending your golden years—whether it’s travel, time with family or taking up new hobbies. Make sure you know how much you will need by using one of our retirement calculators.

What age do I need to start saving for retirement?

Don’t wait! It is crucial to start saving for retirement as early as you can – the earlier you start saving, the more likely you are to meet your retirement goals. It will be nearly impossible to catch up if you wait too long, so save early and save often.

Even if you can only contribute 1 percent of your annual salary, anything is better than nothing and it can add up quickly! Additionally, if your employer does offer a retirement savings plan, take advantage by contributing as much as possible.

Check out our Saving For Retirement tool to see how much you should be saving, taking into account your age and your retirement goal.

What type of retirement vehicles are best?

Financial experts agree that your portfolio should be balanced and include a variety of products. It is important to diversify your savings if you want to reduce risk and improve return. Contributing to your company’s 401(k) is a great way to start a retirement portfolio, but relying too much on one vehicle is a common mistake when preparing to retire. And, as the economic recession of 2008 illustrated, supplementing your 401(k) is important to ensuring your retirement security. One product that can help augment a 401(k) is a Fixed Indexed Annuity (FIA), which protects your principal and can provide a steady income stream for life.

Making sure your savings strategy matches the stage in your life is also critical. For instance, putting your money into high-risk vehicles might make more sense when you’re a young professional, but the closer you get to retirement age, it is a good idea to shift to a lower-risk portfolio. Talking with a financial planner can be a great resource when identifying what financial tools make the most sense for your portfolio at any age.

How much do retirees spend on average per year?

Although it can vary based on the individual situation, the standard guideline for ensuring a sustainable rate of spending is that you should aim to only withdraw about 4 percent of your retirement savings per year.

Products like Fixed Indexed Annuities can serve as a solution to budgeting issues, as they allow you to turn on lifetime income. This can help not only with budgeting monthly expenses, but it can also guarantee that you won’t outlive that income.

How much do medical expenses cost on average in retirement?

According to a recent estimate by Fidelity Benefits Consulting, a 65-year-old couple retiring this year will need an estimated $220,000 to cover medical expenses throughout retirement. That’s why it is so important to make savvy financial decisions and start planning for retirement early so you’re prepared for not only any medical expenses, but are also able to enjoy retirement.

How do I create a retirement plan?

Sit down and determine your fixed and variable expenses and use a simple budget worksheet like this one from personal finance expert, Ellie Kay. Using interactive calculators can also help correctly assess how much your dream retirement may cost. In addition, working with a financial planner to project how expenses might rise in the future is another way to help ensure that you are budgeting properly.

You can also check out our Retirement Income & 401(k) Calculator to see how saving even a small percentage each month can accumulate.

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