I've been writing a lot recently about retirement for people who are worried about retiring with enough money. Today, I saw a piece of advice that makes a lot of sense to me and would be useful for the millions of people doing retirement planning on a more mundane level. The advice was: "Don't retire until you have saved enough money to pay essential bills for three to five years' worth."
To know that number, you'll need a budget that reflects what you will spend. You may have some things in that budget that aren't essential, but for many of us, there isn't a lot of fat.
Let's say that number is close to $29,500 -- twice the average Social Security payout, which, according to Social Security, is what 23 percent of married couples and 46 percent of unmarried persons living in retirement rely on for 90 percent or more of their income.
At that rate, this little guideline says a two-person household needs to have salted away at least $88,500 -- or three times $29,500. If you can put away five years' worth, or $147,500, life would be better. At that rate, you could safely pull off $5,900, or 4 percent a year in income, and still expect that nest egg to last indefinitely as long as you don't spend it all.
That gives you $35,400 a year before taxes -- which will be minimal -- to live on, when you add in your Social Security benefits. If you own your home outright and you have paid off your car, could you live on that amount? If so, you'd be doing better than a lot of other people.
I plugged this income into the National Council on Aging's BenefitsCheckUp.org search engine and looked for help for which this hypothetical couple might qualify. The resulting list isn't very long, but they might get a little assistance.
You also might think about working. One of my low-income friends works 23 hours a week for minimum wage -- $7.50 an hour. She makes almost $7,000 a year and that's enough to make life lots more comfortable.
The bottom line is if you want to live well enough in your old age, keep saving -- and working -- because you'll need everything you can put aside.