The subject of retirement can leave some people squirming. While some live for the now, others save diligently towards their retirement. Knowing how much to save for retirement depends on many factors, such as:
- When do you intend on retiring?
- How many years do you have left till retirement?
- Location of retirement
- Your income
- Cost of living with expenses (factoring in inflation)
- Standard retirement or a more comfortable retirement
- Life expectancy
Life expectancy can vary, but the other factors can be averaged based on the state. Missouri, for example, falls in one of the lowest retirement income states to live comfortably. Missouri is in the midwest of the United States and has a population of a little over 6 million people, the 18th populous state in the United States. Missouri has eight bordering states.
Boonville, situated between Kansas City and St. Louis, is located in Cooper County and has over 8000 people. The cost of housing in Boonville is significantly lower than the average cost of housing in Missouri. A median-priced home in Missouri falls in the lower $100K to mid $150K. More than 50% of residents own their homes.
Apart from low housing costs, Missouri is one state that’s perfect for retirees wanting to live a low-cost lifestyle. According to the US population estimates in 2019, a relatively high percentage of residents are 65 and over. 15.74% of the population in Missouri are 65 years and older, and 2.03% are 85 years and over. Thus, many of these people already live in retirement communities.
Why Retire in Missouri?
Retiring might be some ways away for you, but planning from now is always good advice. Apart from affordability, there are many reasons to choose Missouri as your retirement haven.
Missouri’s cost of living is below the national average, at 16.3%. In cities like St. Louis in Missouri, you can retire under $400K, and Springfield has one of the lowest, under $100K.
Healthcare is always top of mind when considering where to live. You can rest assured that Missouri has two well-ranking hospitals in the state: Barnes-Jewish Hospital in St. Louis and St. Luke’s Hospital in Kansas City.
When it comes to taxes for retirees, Missouri is moderately tax-friendly. The following is what you need to know regarding retirement income taxes:
- Income from Social Security is partially taxed.
- Retirement account withdrawals are fully taxed.
- Regular tax rates apply to wages.
- There is partial taxation on public pension income, and private pension is fully taxed.
Country living with city amenities close by and surrounded by bodies of water means easy access and plenty of outdoor recreation at your fingertips.
How Much Savings You Need To Retire In Missouri
If you consider the entire United States, retiring comfortably can range anywhere from $600K to almost $2M. Depending on your income, how much you plan to spend, and how long you live, you might need to save more, assuming that you will not have other sources of income, other than Social Security.
If the stock market gains in the U.S. continue to go up over time, and if your bank account continues to grow at a steady pace, this may not be as much money that you need for savings for retirement.
If, however, you are using all of your income right now to pay bills every month and still have some payments left over, when it comes time for retirement, then saving closer to 1 million dollars will be essential.
Calculating How Much You Need To Retire in Missouri?
There is no standard way to calculate how much money you need for retirement. However, there are some guidelines used by most financial planners when helping their clients determine how much retirement savings they need.
One of the easiest ways to calculate how much money you will need for retirement is to use an online calculator. It gives you a rough estimate of your monthly expenses during retirement by putting in the following information:
- Your estimated expenses per month, currently working or while actively working toward retiring.
- The amount of your Social Security income monthly income when you reach retirement age.
An example, not considering how long you will live or the growth on your savings, how much you will need to spend every year is 80% of your income pre-retirement. It is possible because Missouri’s cost of living is less than the average. With a median household income in Missouri of $55,000, you will want 40% of that for retirement – $44,000. If you get $2000 a month from Social Security, that makes $24,000. Which leaves $20,000 that you will need from your savings.
The above example is an estimate that does not include other expenses such as medical, travel, giving to charity, or leaving money to family.
Withdrawing from savings should follow the 4% rule. The 4% rule is how much you can withdraw annually from a retirement account. Following this rule will ensure your retirement savings last for at least 25-30 years after you retire.
You can also get a more accurate estimate of how much money you need for retirement by doing a financial planning retirement calculator. Basic information about your current income and spending habits, a financial planner can use that information along with other financial information to calculate your estimated savings needs now and into retirement.
The bottom line is that retiring can be an exciting time in life, and it’s vital to ensure you prepare for your retirement. There are many factors to consider to reach your retirement goals. Even with financial planners and advisors, you still need to research this information on your own because it can be overwhelming sometimes.
Lastly, even after calculating how much savings you need to retire in Missouri, the numbers are not set in stone. They can be adjusted to increase or decrease depending on your life and if situations change, for example, due to changes in income or source of income, health, emergencies and lifestyle preferences.
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