Imagine you’re 63 and ready to retire, with plans to live on $80,000 a year. The question is: how much should you have saved by that time?

Nicholas J. Colantuono, CFP® joins Better Money Boston with WCVB Channel 5 to dive into a typical retirement scenario and figure out how much money someone would need to save to retire comfortably.

Look at Your Income Sources

It’s all about income in retirement. When you’re no longer working and saving, having a clear picture of what your guaranteed monthly income streams will be is crucial. This may include pensions, Social Security, rental income, and any dividends or interest you might earn. Identifying these sources will give you a good starting point to begin creating your retirement income plan.

Understand the Tax Implications

Taxes are one of the biggest expenses retirees face, and understanding how they impact your overall retirement plan is key. Retirement income can come from many different sources, whether it’s interest, dividends, or income from Social Security, and each is taxed differently. Knowing these distinctions and implementing tax-efficient strategies now can help you avoid any unwelcome surprises down the road.

Factor in Inflation

While we’d all wish it would, inflation is not going away anytime soon. The world we live in is getting more and more expensive. When you’re planning for retirement, it’s important to factor rising costs into your retirement income plan. What you think will be enough money today might not be enough in the future. For instance, while you may need $80,000 a year at age 63, you will need to give yourself raises over the next 10 to 20 years to stay ahead of inflation.

Consider Healthcare Costs

While you may not have thought much about healthcare costs in your 30s or 40s, by the time you hit your 60s or 70s, this becomes a much bigger concern. Healthcare expenses, such as long-term care, prescription drugs, and Medicare premiums, are some of the largest costs in retirement. Planning for these expenses early on can reduce the financial burden later. As you and your financial advisor begin to construct your financial plan, it’s important to consider the toll that potential long-term care needs or unexpected medical expenses could have on your retirement goals.