How Much Money Do I Need To Retire?

One of the most common questions asked by those who realize that they cannot work forever and start to suspect they may outlive their money is “how much money do I need to retire?”

As a result, they realize that they may have to live a less expensive lifestyle in retirement.

If this describes you, then you need to ask yourself whether you are expecting your family to take care of you, how soon you plan to retire, and the state of your health.

The answers to these questions are crucial when determining how much money you will need for the retirement lifestyle you want, and how much you’ll need to save between now and then.

Clearly the idea of working until your last breath does not sound very appealing.

The idea of retirement varies from person to person, so you need to be specific about what retirement means to you.

Write out a list of what you would like to do when you retire.

This could include travel, fishing, playing golf, doing volunteer work, learning a new skill, or relaxing and sleeping all day. It is all up to you, after all it’s your retirement.

At least you have to be clear on what you want to do, then you can make an estimate of how much it will cost you.

If you plan to retire in 35 or 40 years from now, then estimating your retirement income needs in the future is going to be difficult.

You may start with an estimate and begin saving to invest in assets that yield high capital gains.

However, you have to regularly review your retirement plan and adjust your estimate of retirement income needs as your vision of retirement begins to come into focus.

If you are retiring in the next 3 to 5 years, you may need to replace 70 to 90 percent of your pre-retirement income with some form of passive income to enjoy the same standard of living you had before retirement.

Large medical bills tend to keep retirement costs high. As a result you need to be prepared to dispose of assets that are not producing much income or growth, and invest the proceeds in cash generating assets.

Aim for higher returns on your investments although you should never invest in anything you do not understand or that you are uncomfortable with.

Much as retirement may look like a long time away, it pays to start planning early. Developing the habit of saving for retirement is easier when you are young.

The final outcome of your efforts may be in the future, but you’re living each day by taking steps toward that outcome.

However, if retirement is just around the corner for you, it’s never too late to start. It’s only too late if you don’t start at all.

Understand that when it comes to retirement planning, time is your greatest ally.