Determining Your Target Retirement Number
Approaching retirement at 64 requires a clear understanding of your financial needs. The first step is to move beyond general averages and calculate a target number that reflects your unique situation. This involves estimating your post-retirement expenses and projecting your income from all sources.
The 80% Rule and The 4% Rule
A common guideline for estimating your retirement income needs is the 80% rule, which suggests you'll need approximately 80% of your pre-retirement income to maintain your current lifestyle. The assumption is that certain expenses, such as commuting, saving for retirement, and work-related costs, will decrease.
Another popular benchmark is the 4% rule, which states that you can withdraw 4% of your savings in the first year of retirement and adjust for inflation in subsequent years. If you aim for $80,000 in annual income, the 4% rule suggests a nest egg of approximately $2 million.
Your Retirement Budget
Create a detailed budget to personalize these rules. You can categorize your expenses into needs, wants, and new retirement costs.
- Needs: Essential costs that will continue, such as housing (mortgage or rent), utilities, food, and transportation.
- Wants: Discretionary expenses like travel, dining out, and hobbies.
- New Costs: Anticipate new expenses, especially for healthcare. While Medicare starts at 65, you will need to cover the gap until then. Long-term care insurance may also be a consideration.
Comparing Your Savings to the Averages
Knowing where you stand relative to your peers can be a useful, but not definitive, tool. According to recent data from the Federal Reserve, retirement savings for households in the 55-64 age bracket show a significant disparity between average and median balances.
| Age Range | Average Household Retirement Savings | Median Household Retirement Savings |
|---|---|---|
| 55-64 | ~$537,560 | ~$185,000 |
The average is skewed higher by a small number of very wealthy individuals. The median figure, where half of households have more and half have less, is a more realistic benchmark for the typical American. However, whether your own savings are sufficient depends on your lifestyle goals.
Maximizing Your Income Streams
To meet your retirement goals, you'll likely rely on a combination of income sources.
- Social Security: At age 64, your full retirement age is 67 if you were born after 1960. Claiming benefits early at 64 results in a permanently reduced monthly amount. Waiting until 70 maximizes your monthly benefit significantly. Analyze your health and financial situation to determine the optimal time to start receiving benefits.
- Savings and Investments: Your 401(k), IRA, and other investment accounts will provide a crucial income stream. Strategically managing withdrawals and asset allocation is vital for making your money last.
- Passive Income: Consider generating passive income through sources like a robo-advisor portfolio, dividend stocks, or real estate to supplement your retirement funds.
Critical Steps for Late-Stage Retirement Planning
Even at 64, you can take meaningful steps to improve your financial security.
1. Take Advantage of Catch-Up Contributions
If you have a 401(k), 403(b), or IRA, you can make additional “catch-up” contributions if you are 50 or older. This allows you to boost your savings in the final years before retirement.
2. Delay Social Security If Possible
Waiting to claim Social Security, even for a year or two, can substantially increase your monthly benefit for the rest of your life. If your health allows, consider delaying benefits to build your monthly income.
3. Account for Pre-Medicare Healthcare
Retiring at 64 means you will not be eligible for Medicare until you turn 65. You may need to secure health insurance through your former employer's COBRA plan, your spouse's plan, or a healthcare exchange. This can be a significant and often expensive expense to budget for.
4. Reduce Your Debt
Minimizing or eliminating high-interest debt, such as credit card balances, can free up a substantial amount of your monthly income during retirement. A debt-free retirement provides greater financial stability and flexibility.
5. Consider Relocation or Downsizing
If your current lifestyle is expensive, you can significantly reduce costs by downsizing your home or moving to a location with a lower cost of living. This can help stretch your retirement funds further.
Conclusion: Your Path to a Secure Retirement
While the answer to how much money does a 64 year old need to retire is complex and personal, a focused and strategic approach is key. By defining your goals, assessing your expenses, and optimizing your income streams, you can build a robust retirement plan. Consulting a financial advisor is always a wise step to navigate these decisions effectively.
Remember that retirement isn't a one-size-fits-all journey. Your approach should be tailored to your unique financial situation and lifestyle aspirations. For official information and to use their calculators, visit the Social Security Administration website.
