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How Much Do I Need to Retire?

When it comes to saving for retirement there are SO many opinions on how much you “should” have. I find this so incredibly strange because we all live such different lives and want to retire at different times, so the math just works differently for everyone. I like to live by numbers and let them […]

When it comes to saving for retirement there are SO many opinions on how much you “should” have. I find this so incredibly strange because we all live such different lives and want to retire at different times, so the math just works differently for everyone.

I like to live by numbers and let them make decisions that otherwise can be difficult. That’s the nice thing about math. There’s a right and a wrong answer. When you follow this, you have to realize what the inputs are asking in the formula you’re using.

I will make this process simple for you.

There are a few things you should know or make a decent guess at to start: how much you make, how much you spend now, how much you can save, and how much you plan to spend later. Some of this may feel weird, like- how the heck are you supposed to guess at how much you will be spending 30 years down the road (more or less depending on your age and when you quit working obv) but just make your best guess and go with that. Planning something is better than not planning.

How much do you live on now and do you see this increasing or decreasing later? I like to plan for spending more than I am currently, just because I want to have the freedom to do so if I want. For me, this means tacking on 20% more to what we are spending now. Come up with how much you want to spend in retirement on a monthly basis and use your current spending if you can’t think beyond that for now. You can always adjust.

There are so many online calculators that can help you figure out how much you need to retire comfortably. Some are quite confusing, so I went through a lot of them and found one that I like.

https://smartasset.com/retirement/retirement-calculator#lNkTTeujVu

One thing to realize when going through these exercises is the numbers may seem daunting, but like anything, if you start where you can and stay consistent then over time you will see incredible results. The sad part is when people let the daunting numbers cause them to take no action. If you let this be you there are high chances that you will end up depending on social security in retirement.

ο $1,461 average monthly benefit

ο Social Security benefits represent about 33% of the income of the elderly.

ο Among elderly Social Security beneficiaries, 48% of married couples and 69% of unmarried persons receive 50% or more of their income from Social Security.

ο Among elderly Social Security beneficiaries, 21% of married couples and about 44% of unmarried persons rely on Social Security for 90% or more of their income

https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf

I read the book The Four Hour Work Week and this has shifted my mindset around retirement. What I took from the book was the idea of having mini-retirements through life vs one big one. Americans typically work for at least 40 years and plan for a retirement of 20 years or so.  Both models require you to plan and set money aside to meet your goal, so choose your method and then start planning from there. 

The calculator is helpful for the traditional method of retirement. If you are going for the mini-retirements then you’ll have to run your numbers in shorter time frames. 

Remember that this will be an evolving plan since your circumstances will change over the years. I would recalculate your plan every year as life changes so you keep the plan up to date and to ensure you’re making progress towards your longer-term goals. Book a session with me if you need help getting started!

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