How much to retire? This is a question a lot of older people are asking themselves, as well as many younger who are not close to retirement but who want to plan for it properly. Obviously, there are many different factors to consider. Where will you want to live? What activities do you plan on doing when you retire? Do you have any medical problems that will have to be taken care of? These are all valid concerns.
Inflation rises at roughly 3% every year. This has been the rough average for the past 100 years. Therefore, if you plan to retire at the age of 65, you would do well to keep this in mind. When considering how much to retire, think about how long you will live for. To be safe, plan on living until 100, if you only plan until 85 or 90, you might be in for a shock when you are still alive at that age.
Lifestyle Choices
Figure out how much money you will want to be spending every year. Include things like trips, vacations, dining, and entertainment. Of course, not every retiree wants to travel the world. You may want to spend your time gardening, fishing, or enjoying the company of your grandchildren. Everybody is different. Depending on what area of the United States you live in, you could enjoy a fine living for 30,000/year. If you live in more urban area, or plan on spending more, you could be using upwards of $100,000+ every year.
If you were a fairly frugal retiree, and wanted to have $30,000 to spend every year, for the next 35 years, adjusted for inflation, you would need more than the $1,050,000 that simple math dictates you want for how much to retire. However, your money should also be growing as well, via interest, and possibly dividends.
What Your Money Should Be In
There are some good excellent guidelines for what your money should be invested in. When you think of how much to retire, that money you need should be safe. The bulk of it should be in secure stocks, preferably ones that pay dividends, mutual funds, and assorted savings accounts and CDs. With a sufficient principal balance, you should be able to roughly keep inflation in place, until your principal becomes lower.
Without going into math details, the rough magic number for how much to retire-if someone retired right now, is $1,000,000. If people have alternative sources of income, like social security, or a hobby that makes them money, that number is lower.
If you figure on having a more exciting jet-setting lifestyle, you may want to double or triple that amount. That is a large discrepancy in numbers, but there is a large difference in how people live.
How much I need to retire also depends on when you start saving and how much you put away. The earlier you start saving, the more compound interest works for you. Think about what your plans and goals are for retirement. Make a rough budget, and be willing to account for inflation. How much to retire depends on you, but for most people, it starts at a seven figure number.
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