Retirement planning can feel complicated and time-consuming, but if you’re hoping to lead a certain lifestyle in your golden years — or whenever you choose to leave the workforce — it’s also vital. And if you want to live a middle-class retirement, you’ll definitely want to be prepared with your finances in order.
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But what exactly does a middle-class retirement look like? And how much do you need to have saved up or invested to get there?
“A middle-class retirement typically involves maintaining a comfortable lifestyle without the need for extravagant spending,” said Jake Falcon, founder and CEO at Falcon Wealth Advisors. “Financially, this often means having a net worth that allows for a steady income stream to cover essential and discretionary expenses.”
Also, find out how much middle-class retirees have in savings.
Planning a Middle-Class Retirement: The Numbers
For a middle-class retirement, many financial experts suggest having a net worth of at least $1 million or $1.5 million. The exact number, however, depends on you.
“Having $1 million to $1.5 million in retirement savings could fuel a comfortable retirement for a couple, but the amount someone should save to afford a middle-class retirement depends on their desired lifestyle choices,” said Brett Daniel, Founder at Daniel Safe Money Retirement Solutions.
“For example, some are used to traveling a certain number of times a year and want to continue that in retirement, which may require more savings,” Daniel continued. “The key is ensuring they feel financially secure and able to live the retirement they envision.”
It also depends on how much money you’ve got coming in from Social Security.
“Social Security benefits are also something to consider, as many middle-class families rely on the income to cover a good amount of their retirement expenses,” said Falcon.
To determine the ideal net worth for you, consider the bigger picture, all possible income sources and your dream retirement lifestyle. You shouldn’t need to work part-time or have a side gig to make ends meet. You also shouldn’t have to rely on government assistance — Social Security can be a bonus.
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There’s No One-Size-Fits-All Rule
Retirement planning is deeply personal and should be based on things like your individual circumstances, health and location. What you view as a middle-class lifestyle is also ultimately subjective. But there are some general rules of thumb to get you on the right track.
One is to save 10 to 12 times your annual income before retiring. If you earned $100,000 a year, you should have between $1 million and $1.2 million by retirement. If you earned $80,000 a year — and lived comfortably on that amount — you should have $800,000 to $960,000.
But this general rule will only get you so far. And for Falcon, he believes it doesn’t work for everyone.
“Retirement is far too ambiguous to rely on ‘paper napkin’ financial planning,” he said. “Instead, I would advise individuals seeking out retirement advice to work with a professional who has experience advising on their situation.”
Key Expenses in a Middle-Class Retirement
Like anyone else, retirees are going to have certain fixed and variable expenses throughout their lives. This is true regardless of class.
“For many retirees, their largest debts — such as home mortgages or car loans — may already be paid off, or they are actively working toward paying them down before retiring,” said Daniel. “Other major spending categories for retirees typically include utilities, cell phone, internet and cable bills, insurance premiums, and groceries.”
You might also have unique expenses, like travel or hobbies that cost money. Or you might be paying for long-term insurance, a younger relative’s education or other costs.
“It’s also important to account for potential travel, dining out and hobbies, as these can significantly impact the overall budget,” said Falcon.
Create a Holistic Plan
To plan for a middle-class retirement, some experts say it’s best to have a holistic plan.
“Middle-class retirement isn’t all that different than any other class of retirement. To me, everything starts with a holistic financial plan. You need to understand what you own, what you owe, where you are today and where you are headed,” said Brett Bernstein, CEO and co-founder at XML Financial Group. “From there, you can look at the sources of income you have, assets to assist in generating said income, and the expenses you require and desire to go out the door.”
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This article originally appeared on GOBankingRates.com: What Does a Middle-Class Retirement Look Like Financially?
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
