How much do you need to retire?
Let’s be real here, this number is going to depend on many things.
Grab your journal and get started by answering these questions:
1. Where will you be living? Are you planning to set yourself up in New York or Portugal where the difference in your expected monthly expenses will be enormous! To help you understand how your retirement plans will be affected by where you live, you can find the cost of living for every city online.
2. Plan on having a partner? This reduces costs and is obviously nice to have.
3. You can’t sit around doing nothing in retirement. What are your passions or hobbies you plan on pursuing? Need help with this? Check out this post (why do you want to retire?) to figure this out.
3. How much are your hobbies/passion going to cost you? Are you buying seeds for your vegetable garden or gas for your yacht? Big difference. How much will your hobbies and passions cost you?
4. If you have kids, what’s the plan for them? Do you want to help them out in life or let them figure out this money thing on their own?
5. Do you think you will have grandkids? What are the things you would like to do with them?
6. Is there a possibility that you may have some hereditary medical issues? How would you want to be prepared for this?
7. What is the one thing you absolutely don’t want to skimp on? You can handle skimping a bit now but in this ideal retirement world what is a "HAVE TO HAVE”? Is it the food you eat? Coffee? Spa treatments? Online courses? Toy trains? You get it. What will make your quality of life so much better during these years?
After you have all of this figured out you will have a much better perspective of how much you may actually need per month/year. This will enable you to live the way you want.
Still want a number? Check out this calculator https://www.nerdwallet.com/investing/retirement-calculator
I have made a retirement planning worksheet available for you on my Etsy shop. Plug in your retirement accounts and desired retirement number and VIOLA, it will tell you at exactly what year you can expect to retire! Find it here in my Etsy shop. Have fun!
Another equation comes from The FIRE community - multiplying your expected annual expenses by the number of years you plan to be retired. Normally they say 25. (which doesn’t actually make sense to me since who the hell knows how long you will be living!)
Let’s say you will need 50k a year to live comfortably in your retirement years. You should aim for having $1,250,00050 invested correctly (50,000 x 25) before retiring.
Notice I said “ invested correctly”. This is because you shouldn’t have money sitting in your bank account doing nothing. In fact, you still need to remain on a budget because if not, you will end up blowing it, baby!
And trust me when I tell you this, something will come up to tempt you and send you back to work!
Plan to take out your allotted amount (in this instance, $50K) and let the rest go into investments, building wealth to help with inflation and other unexpected events that arise.
I’m not 100% sold on this equation but I understand it works for some.
Since I come from the world of coaching, I like to lean into more of the safe side of things and recognize things change in life. Make a budget and do some retirement planning but remember things will change. It’s always a good idea to sit down with an advisor if you don’t have the confidence in understanding your investment options.
Any other suggestions? Feel free to leave a comment below.
