Asking the right questions for retirement

The following information is provided by the Augusta University benefits department:

VALIC Saving Matters

Calculating your retirement income needs

If you follow the news at all, you probably know that saving for retirement is something of a crisis for a significant portion of our country’s population. So how much do you need to save?

How much is enough?

The answer is both simple and complicated: At a minimum, you need to accumulate enough to cover all of your essential living expenses through your entire retirement phase. If you intend to do anything beyond merely existing, you will need to save additional money to cover your nonessential expenses.

People tend to talk about “the number” that you should accumulate, but the place to start is to determine what will it cost you each month to maintain the lifestyle you have. From there, you can make your calculations using one of the online calculators on

Can’t live without it

First, let’s address the difference between essential and nonessential expenses. Anything you must have to live in relatively modest comfort may be considered essential. This may include:

  • Shelter — rent, home repairs, property taxes, mortgage payments, homeowner association dues, etc.
  • Food — meal plans, groceries (for most people, these should be considered separate from dining out)
  • Health care — prescriptions, insurance, dental care, nursing aid, eyeglasses, etc.
  • Clothing — everything from shoes to winter parkas
  • Utilities — electric, water, gas, heating oil
  • Transportation — car insurance and maintenance, bus/train tickets, taxi fares

Contrast this with nonessential expenses — the things in life you may treasure, but you probably wouldn’t physically suffer without, such as:

  • Travel
  • Hobbies
  • Entertainment — cable TV, concerts, movie tickets, special events
  • Dining out
  • Donations
  • Subscriptions — magazines, newspapers, online subscriptions
  • Gifts
  • Club dues

Only you can decide which expenses are truly essential to your life, and which you might be willing to scale back on to stay within budget. If you consider something to be truly essential, you need to make it a financial priority.

Big or small, include it all

For the most accurate picture, your tally needs to be realistic and thorough. If you don’t already, you should carefully track all of your expenses, big and small, for at least a couple of years before retirement. Some expenses, like heating and air conditioning, change dramatically with the seasons; consider averaging them out over the course of the year. Don’t forget the little things like toiletries, laundry detergent and everything in between. You may have annual expenses like vehicle inspections, or future expenses like replacing car tires or a hot water heater. Will your car last for 20 or 30 years of retirement? If not, factor in a future replacement.

Add it and pad it

No one knows what the future will bring. There is no guarantee that today’s heating bill — or any other expense — will be representative of the bill you get 10 or 15 years into retirement. You should factor in a reasonable inflation rate. To be conservative, build in some flexibility. After all, 25 years ago few people were paying for cell phones or internet access.

It’s easy to track, categorize and prioritize your expenses. If you’d like some help projecting your expenses into the future, ask one of your dedicated VALIC financial advisors, Ross Douglas or Tommy Burckhalter at 706-722-4600, for assistance.

Securities and investment advisory services offered through VALIC Financial Advisors, Inc., member FINRA, SIPC, and an SEC-registered investment advisor.

Annuities issued by the Variable Annuity Life Insurance Company. Variable annuities distributed by its affiliate, AIG Capital Services, Inc. member FINRA.

Copyright © The Variable Annuity Life Insurance Company.

All rights reserved.

VC 22976 (02/2015) J95190

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Written by
Eric Johnson

Eric Johnson is publications editor at Augusta University. You can reach him at

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Written by Eric Johnson

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