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After a lifetime of work, we want to reward ourselves with freedom.


As you figure out if you are ready to retire, there are many financial questions. How much income do we need in retirement? How much will Social Security provide? How about your pension? There are two kinds of questions here, ones about income (how much money you take in) and questions about expenses (how much money you spend).

How Much Will I Need?

Typically, retired people spend less than working people, but this can vary a lot person to person. Here is a useful calculator to help you think about whether you’ll spend more, less or about as much money per month in retirement as you do now. This should help you get a rough idea of how your expenses will change. This leaves us with questions about income.

Where Does the Money Come From?

Most union members have three sources of retirement income: pensions, Social Security and personal savings. Not all of us have all three. In some parts of the country certain public sector workers aren’t eligible for Social Security, but they often have superior pensions. Both pensions and Social Security give a fixed and predictable amount of income to eligible retirees. You will know the amount of your check and when it will come. Personal savings are usually in the form of bank accounts or retirement savings plans like 401K’s.

Some of us also use Individual Retirement Accounts (IRAs). These accounts are designed for individuals to open without employer participation. The standard version is similar to a 401(k) in that it offers up-front tax savings. If we put money into a standard IRA, that money is exempted from income tax. Another version, called a Roth IRA, provides tax savings in the future. We still pay normal income tax on the money before we put it into our Roth IRA, but there is no tax on the money when we take it out after retirement.

Social Security

Social Security pays a monthly amount based on how long you were in the system, how much you contributed and when you began accruing benefits. Exactly how these factors fit together is different for people of different ages. Someone who is 30 years old in 2011 would get 100 percent of the Social Security benefit if he or she retired at 67. If that worker retired early at 62 and began collecting Social Security at that age, then he or she would receive 70 percent of their benefit. Here is the Social Security Administration’s Quick Calculator—it can help you estimate how much you can expect to receive from the SSA upon retirement.

AARP’s Social Security Benefits Calculator

The AARP Social Security Benefits Calculator widget is designed to allow you to quickly see an estimate of your Social Security benefits, and to also further explore the details of benefits and retirement via the more robust tool residing on AARP’s website if interested.


Many pensions are calculated based on how many years you worked for the company and how much you were paid. For example, let’s assume a person is 65, has worked at ACME Corp. for 30 years, has always made $50,000 and received 2 percent per year worked. At retirement, this person’s pension would be worth $30,000 per year ($2,500 per month). This is arrived at by multiplying 2 percent per year x 30 years x $50,000. Different pension plans use different numbers, so this example probably doesn’t exactly reflect any of our situations. Some might get 1.5 percent per year while others may get 2.5 percent or some other amount. You normally can get a very specific forecast of your pension benefits by speaking with someone from the plan or a union steward in your workplace.

In multi-employer plans, which are common in the construction industry, a worker’s pension benefit is determined based on hours worked rather than pay. The benefit formula, for example, may be a specific dollar amount per month times the number of years the worker earned service credits. There is usually a minimum threshold of hours to work to be eligible for a service credit. There are wide variations in the dollar payout and required hours from plan to plan and sometimes from year to year. Those covered under multi-employer funds need to know how their plan works and make sure they are credited for all the hours they worked; save your pay stubs. Your plan administrator can provide you with this information. It is especially important to know how many hours you need to work to get a service credit (the number may change year-to-year). Working an extra few hours could be worth an extra few hundred dollars a year for decades. Make sure you have the information so you don’t miss out!


Once you have a basic idea of how much money you’ll need in retirement and how much you would receive if you retired, you are ready to see if you are ready. If you are currently on pace to make as much as you will need from your pension and Social Security, then you are ready to retire as soon as you are eligible for those payments. This calculator will help you measure those numbers and see if they match up well. Many workers will find that more income is needed to make our retirement comfortable. To accomplish this, consider working longer (which can lead to increased SSA and/or pension payments) or perhaps saving more in contemplation of retirement so that cash/investments can help bridge the gap comfortably.

Retirement can be a tricky financial situation. Your needs will change drastically if you decide to stop working. Here's a calculator to help you prepare for your future needs.

Thinking of taking out a reverse mortgage? Read this first.

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