Basic living expenses refers to those costs that you must pay no matter what, such as food, housing, utilities. Get paper and pen, write down your basic living expenses, then add any debt and monthly expenses you want to pay for hobbies and such.
According to Newsweek, the average monthly Social Security benefit for a retired worker is about $1,230 at the beginning of 2012. For a married couple, it could be a total of about $1,800 per month if you were both top wage earners.
Add to that a modest nest egg of $250,000 (if you have it in savings and depending on how the money is invested, your drawdown strategy, and the inflation rate), you could retire with something around $3,000 per month. Maybe.
Some people can live on less, others need more. It often is not what you want, but what you are forced to live on like it or not.
Will You Have Money the Last 20 Years of Your Life
Believe it or not, the last 20 years of your life is financially more important than the 20 years between 20-40 years old.
Living beyond age 62 is no lazy days life -- even if it should be. If it's a struggle today to pay bills... then just wait until you're in your 60s.
Age, health or any number of other issues, such as, you no longer have a traditional job and the paycheck from that job. means little to no income.
Do you have the money you need to pay your living expenses in the next 20 years and more? It’s a good question, but the real question to consider is “do you have the money you need to live in the last 20 or 30 years of your life after you no longer work a traditional job?”
What if you need $1,800 a month?
If you live on $1,800 a month now, and you need to have that money from age 62 through when you are age 82, here's what you need.
20 years X 12 months = 240 months x $1,800
You need in savings ready to draw out $432,000 by the time you turn 61 years old.
What if you work until you are 67 years old? If your full benefits for Social Security are available to you when you are 67 and you get a monthly check of about $1,200 (more or less), you still need $600 a month more.
240 months X $600 = $144,000 in savings ready to draw out when you turn 66 years old.
What if you can't live on $1,800 a month? What if you spend something closer to $3,000 or $4,000 a month?
You are in big trouble if you are not saving a big boatload for those years when your income is seriously reduced or stopped altogether.
Do your own math. Do something. At least, start a home business. Grow it so you have the possibility of income should you need it.