A happy retirement begins with a realistic retirement plan. But this is not always easy to create. There are a number of variables, including life expectancy, inflation, and Social Security that make it difficult to determine with accuracy how much you will need in retirement. While living expenses generally decline in retirement, they may not decrease quite as much as you'd think.

Two in five retirees are spending more than they expected in retirement, according to a recent Global Atlantic Financial Group survey, despite spending an average of 32% less than nonretirees. For some, correcting this simply means cutting back on discretionary expenses, like travel or dining out. But for others, it can spell a real crisis if their savings run out prematurely. Below, you'll find the key insights from this study along with some guidance on how you can create a realistic retirement plan that will carry you through the end of your days.

Senior woman looking concerned

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Retirees' key regrets

The Global Atlantic survey highlighted retirees' three key regrets: not saving enough, relying on Social Security too much, and not paying down debt prior to retirement. It goes without saying that if you don't save enough, you will struggle in retirement. You may have to give up some of your dreams, like traveling around the world, or you may need to continue working part-time in order to make ends meet.

While it's true that Social Security will provide some income in retirement, it's important that you have realistic expectations of how much it will cover. The average Social Security check is about $1,375 per month, but yours may be more or less than this depending on your average income during your working years and the age at which you begin taking Social Security. You can start as early as 62, but you won't receive your full benefit per check until you reach your full retirement age of 66 or 67, depending on your birth year. The future of Social Security is a bit uncertain, with financial challenges that could require significant future changes to the program.

These two factors can place a serious strain on your retirement savings, which will only get worse if you carry debt into retirement. If it's high-interest debt like credit card debt, it's possible that it could spiral out of control, forcing you to deplete your retirement savings more quickly than you had anticipated. If it's a home loan and for some reason you fall behind on your payments, you could lose the very roof over your head. That's why it's essential that you do what you can to pay down your debts before you enter retirement.

How to create a realistic retirement plan

Creating a realistic retirement savings plan and reevaluating it periodically will help you avoid these regrets and keep you on track for your goals. The first step is to estimate the length of your retirement. The average life expectancy in the United States is 78.6 years, but this may be longer or shorter for you. Subtract your planned retirement age from your estimated life expectancy to figure out how long your money will have to last.

Then, calculate your annual living expenses in retirement, keeping in mind that some costs, like caring for children, may decrease or disappear while other costs, like healthcare, may increase. Total your monthly living expenses and multiply this by 12. This is your annual living expenses, but you can't just multiply this number by the number of years of your retirement. You also have to factor in inflation. A good estimate is about 3% per year. If you're struggling to do this math on your own, you can use a retirement calculator to do the hard work for you.

Finally, you need to subtract what you're going to get from Social Security to figure out how much you need to save on your own. You can estimate your Social Security benefit by creating a my Social Security account. This will show you about how much you can expect based on your current work record if you start claiming Social Security at 62, your full retirement age (66 or 67), or at age 70. You're entitled to 100% of your scheduled benefit at your full retirement age, but you can begin claiming Social Security at age 62 for a reduced benefit per check or delay Social Security until age 70 to make your checks larger.

If you have debt you need to pay off, it's best to work on this while you're saving for retirement. Figure out how much money you have left over after paying your monthly living expenses and devote a portion of this toward your retirement savings, according to the retirement plan you've worked out, and put the rest toward your debt. You may want to look for ways to boost your income, like working extra hours or picking up a side job, if you're struggling to pay down your debt and save for retirement at the same time.

A detailed retirement plan is essential if you want to avoid running out of money in your final years. By following the steps and avoiding the common mistakes outlined above, you can make preparing for retirement as stress-free as possible.

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