From the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®


(August 4, 2005) — You’ve heard how important it is to save for retirement. If you are wondering how much is enough, you’re not alone. Determining what your expenses will be years from now can be a challenge, but with some careful planning, you can achieve a secure retirement. The following advice from the Virginia Society of CPAs will help get you started.

Establish retirement goals.

When you envision your retirement, what do you see? Quiet time at home with your family or worldwide travel? Puttering in the garden or spending your days on the golf course? Working at a part-time job? Many CPAs suggest that you’ll need about 70 to 80 percent of your current annual income to fund a comfortable retirement. But to a great extent, how much you will need depends on your lifestyle goals and the costs associated with them.

Estimate retirement expenses.

First, analyze your current spending habits. Even though your expenses will change in your retirement years, an accurate picture of your current expenditures serves as a helpful baseline for estimating future needs. Then consider how your expenses may change during your retirement years, estimating those that will increase and those that will decrease. For example, if your mortgage will be paid off and your children’s tuition covered, your income needs will be significantly lower. Retirees don’t pay Social Security payroll taxes, and expenses such as business clothing, commuting costs and business lunches are eliminated. And with reduced income, you might even find yourself in a lower tax bracket.

Alternately, expenses such as health care and health care insurance are likely to increase as you age. And with more free time, chances are you’ll spend more on entertainment and leisure activities. Utilities, car and homeowners insurance costs, and gifts and contributions will probably stay about the same.

Consider inflation.

Don’t forget that the cost of living will continue to rise in the years leading up to and during your retirement. While it’s difficult to predict what inflation will be, it’s helpful to know that prices have risen about 3 percent per year for the past several years, and the average increase in the Consumer Price Index for the past 30 years has been 5.4 percent.

Decide when you will retire.

To calculate your total retirement needs, you also have to estimate how long you will be retired, since the longer you are retired, the more income you’ll need. If you’re considering taking an early retirement, think about what you’ll give up — for many workers, the final years of employment are the highest-earning years of their careers.

Estimate your life expectancy.

Your life span is another important factor to consider. A longer life means that you’ll have even more years of retirement to fund. Government statistics, life insurance tables or an online life expectancy calculator can help you arrive at a reasonable estimate of how long you’ll live. Remember, these are only estimates based on age, gender, health, lifestyle, occupation and family history.

Consult with a CPA [and a CERTIFIED FINANCIAL PLANNER™ professional].

A secure retirement doesn’t just happen. It can be achieved only by anticipating future financial requirements. A CPA [and a CERTIFIED FINANCIAL PLANNER™ professional] can help you calculate your needs and devise a plan for funding your retirement.


The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at


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