How Your Earnings Can Affect Your Retirement Value

May 11, 2023

How much you earn can affect your retirement value, and certain factors could play a role. Therefore, you must understand the impact and how much you might get. Retirement planning is one of those things you know you need to do. However, people do not want to prioritize it until retirement age.

How Does Income Affect Retirement Value?

One of the first factors in a solid retirement strategy is understanding how much you need to retire comfortably. Typically, financial planners advise that you can live comfortably on 75% of your pre-retirement income. Another recommended goal is accumulating 10-12 times your annual salary at retirement. You can continue earning income by working after retiring. However, there may be a reduction in your Social Security payments if your income exceeds the annual limit.

Examine Your Expenses

You must take stock of your expenses and consider how they will change in retirement. For example, if you are currently paying a mortgage but know you will pay it off before you retire, you can deduct the mortgage payment from the monthly expenses you should plan for when you stop working. Some factors to consider when calculating expenses include basic living expenses, existing debt, and planned retirement lifestyle.

Examine Your Assets

Examining what you have is as important as examining what you must spend.

  • Pension plan (if applicable)
  • Personal investments
  • Property ownership
  • Resources such as health insurance, long-term care insurance, and annuities
  • Retirement accounts
  • Savings and checking accounts.Annuities

Set Your Retirement Goals

Goal-setting is a critical step in determining your retirement value. If you hope to purchase a vacation home or a boat or take an annual cruise around the globe, you must factor in these expenses. You must also consider existing debt and factor appropriate payments into future plans. Most financial advisors recommend creating an emergency fund covering 3-6 months of living expenses as you save for retirement.

Choose a Plan

A wealth of retirement plan options are available to enable your money to do the work for you. The most beneficial plans offer tax advantages and savings incentives, such as a 401(k) that includes employer matching contributions. For those who don't have a 401(k) or who are already contributing to one and want additional savings, IRAs are significant options that offer tax advantages. Your current earnings will impact your savings; most experts recommend 10-15% of your salary. Purchase an annuity to supplement your retirement. Annuities are safe and secure no matter what is happening in the stock market.

Start Planning Now For Retirement

While it is wise to begin planning for retirement early, there is always time to start saving toward the day you can stop working and make life a bit easier. By taking stock of your assets and expenses, you can create a simple plan based on your income to enable you to retire comfortably.

About 1891 Financial Life

At 1891 Financial Life we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs.

Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.