It’s a basic question for many boomer males. “How much money do I really need to retire?” And believe it or not, there is a simple answer that comes courtesy of of our friends over at AARP.com. And it all starts with you answering four basic questions. Here’s to increasing your financial knowledge on this Wealth Wednesday.
How Much Money Do I Need To Retire?
“But a true retirement number is different for everyone. It depends on factors such as where you’ll live and how healthy you’ll be as you age. And most challenging of all — how long will you live?”
– Dan Yu, Managing Principal, EisnerAmper Wealth Advisors
In other words, how much do you need to retire comfortably? By now, you’ve likely heard the conventional wisdom: that you should aim to have a nest egg of $1 million to $1.5 million. Or that your savings should amount to 10 to 12 times your current income.
For people approaching retirement, those figures might be a source of panic, denial and dread. You can get a better idea of what you’ll need by answering these four basic questions:
1. What will your living costs be? The first step is to figure out how much you’re spending now. Start by creating a budget to track your expenses. A much-touted rule of thumb says you’ll need 70 to 80 percent of your pre-retirement income after you finish working.
2. Will your nest egg last as long as you will? A healthy, upper-middle-class couple who are 65 today have a 43 percent chance that one or both partners will live to see 95. Savings need to be adjusted accordingly.
3. Will your savings generate enough cash? There is no way of knowing what will happen to interest rates — and inflation — in future years. But for a retiree to generate $40,000 a year after stopping work, he or she will need savings of about $1.18 million to support a 30-year retirement.
4. What if I haven’t saved enough? The worst thing you can do is throw up your hands if the number feels out of reach, Yu says. First: Save, save, save. Savers can double, on average, their nest eggs in the last decade or so of their working lives, thanks to the magic of compound interest, says Michael Kitces, director of planning research at Pinnacle Advisory Group.
You can read the entire post here. Let us know how you’re doing with your retirement planning. Any tips you can share with us. Let us know below.
Do well.
