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Planning For Your Future Bookmark this page and share it with others! (Or press Ctrl/D on Firefox)Making plans for retirement can be stressful, but it is necessary to make these arrangements while you are still young. How much money does one need to retire? This is complicated and there is no one size fits all answer, but it boils down to the type of retirement you want to have. Many financial planners believe most at retirement should have somewhere between 70% and 80% of your working income. The factors that can alter these figures depend on things such as:
These are only some of the factors to consider when thinking about saving for retirement. Most of the researchers suggests that an individual withdrawing 4-5% of assets annually is probably pretty safe, especially if your main nest egg is in a fund creating accumulating interest. This means you'll need about $200,000 to $250,000 in capital for every $10,000 of required income you want in retirement (pre-taxes). If you estimated your lifestyle in retirement requires you having an income of $30,000 per year, you should probably see to it you have between $600,000-$750,000 in savings. If you estimate your retirement needs to be worth $50,000/year, you will need between $1 million to $1.25 million. If you estimate it to be $100,000/year, you will need between $2 million to $2.5 million. How Do You Calculate How Much You Personally Will Need?First determine at which age will you seek retirement. On average, most people in the US will live to age 82. If you are fairly healthy and active, you will probably live that age or longer. If you are in poor health, you may not live that long. If you have relatives who have lived long past that age, chances are you might just live well beyond 82. On the other hand, if most of your relatives die pretty early, chances are you might follow. Let's say you plan to retire when you are 70 and your family history is one that would make you believe you could live up to age 85. This means you could live 15 years and would need the funds to support your lifestyle without having to depend on employment. What if you have decided you wanted to live on $35,000/year? That would be $525,000 you would have to reserve if you knew in advance that was how long you were going to live and if you did not take in account inflation. Unfortunately, you cannot count on living on $35,000 today being the same as living on the same income in another 40 years which could be the equal to having $5000 per year. However, if you had that much of a nest egg about 10-15 years before you planned on retiring and it was accumulating pretty good interest terms on your investment, that money could support your plans of living what would be equal to earning what today is worth $35,000/year. How Should You Invest Your Retirement Nest Egg?One strategy is to put an amount equal to one year's expenses in a money market fund and put another one year's expense into stocks while you are many years away from retirement. The most convenient and least expensive way to invest would be through one of the several available low fee mutual funds. Put the balance into a laddered portfolio of 2 to 5 year US Treasury notes or FDIC insured bank certificates of deposit (CDs). Depending on your age, your comfort in taking risks, how soon you want to retire, and your current income needs - your personal plan can only be determined with a professional who can see the big picture, knows all the available options that are suited to your needs and expectations, and can give you the best advice to get you where you want to be. It is never too early to start planning for your retirement. Understanding the types of benefits you are eligible for, and how they all fit together, can be a challenge. Here are some resources to help you get in touch with the people who can help you with your personal plan:
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