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Determining Your Income Needs

To begin estimating your income needs during retirement, take a look at what it costs you to live today. A quick and easy way to calculate what you spend is to take last year's gross annual income and subtract taxes and savings. The rest you spent! However, you may want to spend a little more time estimating your expenses by category. Print this file* to help with this task.

When you leave the workforce, you will eliminate expenses such as commuting costs, union dues, and business clothes. Many people pay off their mortgage before they stop working, or choose to relocate to lower-cost housing. However, other expenses will likely increase. For example, health care costs may go up. Leisure and entertainment expenses may also increase during your retirement years, particularly if you plan to travel.

Most experts agree that you'll need to replace between 70 and 90 percent of your current income, adjusted for inflation, to live comfortably during retirement.

Getting Started  Sources of Retirement Income -- Social Security