If you are asking the question how much do I need to retire then several things need to be taken into account. For those of you who have been spend thrifts throughout your lives and you don’t intend on slowing down in retirement you better be putting away a hefty chunk of your paychecks every month.
Most will work on the assumption that to live comfortably in retirement they will want to be saving enough to give them at least 75% of what they are currently earning now.
This again depends on several things including whether you have paid off your home mortgage and more importantly, whether your health is in tip top condition. The 75% rule should be enough but you will more than likely need to cut back in other areas such as entertainment expenses.
If you plan to do some of the things you haven’t been able to do when you are in your working life such as travel extensively or even build a brand new home, help the kids with their bills such as mortgage payments then 75% of your previous working income might be stretching friendships a little. We are talking earning the same levels as when you were working or more.
Planning for retirement requires you to be honest with exactly how you will spend your money. Remember, we are living a lot longer today so assume you retire at age 65, then living beyond 90 is a strong possibility provided you don’t have any health issues. If you do, then having money to cover those costs will also come into calculations.
How Much Do I Need To Retire?
Estimating how much you will need to retire requires a little science. Do this exercise:
- calculate what you are spending now on a monthly basis
- look at every aspect of your spending categories
- look ahead and take age into account and how those spends might differ when you enter retirement compared to now
It’s not exact science but it will give you a general guide.
Here’s a quick calculation if you are currently forty years of age on a current annual income of $60,000 a year. If you plan to retire at age 65 on 75% of your current annual income with an expected annual pension of $12,000 and Social Security payments of about $19,000 you will need a total of about $489,000 by the time you retire in 25 years time.
Check with a financial planner for more accurate assessments but in the meantime for a ball park figure, do a search for “retirement calculator” online and this will give you an idea of what you might be looking at.