How Much Will You Need To Retire?

FaithFi: Faith & Finance | Jan 17, 2025

--:--

Show Notes

One of the most common questions people ask is, “How much will I need to retire?” The answer is, “It depends.” It depends on your lifestyle, needs, and one key factor: how much you’re willing and able to cut from your budget. Let’s explore how thoughtful adjustments can help you bridge the retirement income gap and make this season of life meaningful and fulfilling.

Understanding Retirement Income

Most retirees experience a drop in income. While many work-related expenses disappear—like commuting, clothing, and dining out—studies show the average retirement budget is about 60% of pre-retirement income.

Experts generally recommend aiming for 75-80% of your working income to cover expenses. For example, if you’re earning $75,000 annually, you’ll need approximately $56,000 in retirement. However, if Social Security and investments only generate 60% of your income, you’ll face a shortfall of $11,250 annually—or $940 per month.

To bridge that gap, you can:

Work longer to save more.
Work part-time in retirement.
Cut expenses to close the gap.

How to Cut Retirement Expenses

1. Downsize Your Home

If your large family home is mostly empty, consider downsizing. A smaller home reduces:

Maintenance costs.
Utility bills.
Property taxes.

Additionally, selling your home can free up cash to convert into an income stream. If you’ve lived in the house for two of the last five years, you can exempt up to $250,000 in capital gains (or $500,000 for married couples).

2. Reduce Transportation Costs

Without work commutes, you may not need two vehicles. Selling one:

It cuts repair costs, registration fees, and insurance premiums.
Generates extra cash for your retirement fund.

Consider ride-sharing services for occasional conflicts when you and your spouse need to be in different places at the same time.

3. Drop Unnecessary Insurance Policies

Some insurance becomes unnecessary after retirement:

Disability Insurance: This replaces lost income when you can’t work. If you’re retired, you no longer need it.
Life Insurance: If your children are financially independent, you can scale back or eliminate coverage, especially since premiums rise with age.

4. Eliminate Debt

Carrying consumer debt, such as credit card balances, into retirement can significantly drain a reduced income. Instead, use the savings from downsizing, selling a vehicle, or cutting insurance to pay off high-interest debt as quickly as possible.

Embrace the Opportunity to Give

Retirement isn’t just about cutting expenses—it’s also about finding purpose. With more free time, consider serving your church or favorite ministry. Retirement offers an incredible opportunity to pour your wisdom and experience into others for God’s glory.

Retirement can be one of the most fulfilling seasons of your life. You can find contentment and purpose by thoughtfully managing your expenses and seeking God’s guidance. Remember, Christians don’t retire from something but to something. Ask God how He wants you to use this season for His glory, and trust Him to provide for your needs.

On Today’s Program, Rob Answers Listener Questions:

My mother-in-law gifted our house to my wife during estate planning. I know this is not ideal because it sets the cost basis to what they originally paid. Can my wife return the house and have her mom set up a transfer-on-death (TOD) deed instead?
I recently sold my house and have the proceeds. I want to be a good steward of this money, but I'm unsure if I should put it in a high-yield savings account, an index universal life insurance product, or something else. What would be the best investment approach for this money?
I'm 80 years old, and I've taken the required minimum distributions from my IRA account for about 10 years. I do a qualified charitable distribution each year and give all that to the church. But when I die, my kids are beneficiaries of the IRA, where they have to continue the minimum required distributions. I want to understand how that works for my kids when they inherit the IRA.
Should I put my money in the S&P 500 index fund or use the Charles Schwab Intelligent Portfolio for my Roth IRA? Which option is the best investment approach?
My husband just recently passed away, and I haven't received the life insurance payout yet. When I do receive it, do I need to pay a tithe on that money?
I just finished my divorce, and the judge is letting me keep my $24,000 401(k). I want to use that money to buy a small house because the rent is too high. Are there any fees or penalties for taking a hardship withdrawal from my 401(k) to use for a home purchase?

Resources Mentioned:

Remember, you can call in to ask your questions most days at (800) 525-7000. Faith & Finance is also available on the Moody Radio Network and American Family Radio. Visit our website at FaithFi.com where you can join the FaithFi Community and give as we expand our outreach.