How much do I need for retirement?

genchan · #1 (**permalink**) 12-30-2004, 09:05 AM

How much money does a person need to retire comfortably? Is there a basic standard to go by?

Tree0164 · #2 (**permalink**) 12-30-2004, 01:22 PM

A good rule of thumb is to save 20% of your gross pay towards retirement. Most folks that is not happening. Try to contribute atleast the amount amount of your company matches. If you can fully fund, your company's 401k and then make a contribution to your Roth IRA.

The younger you start contributing to your retirement funds, the more money that you will need to actually contribute.

Good luck!

terry1156 · #3 (**permalink**) 01-02-2005, 09:26 AM

I heard somewhere that a basic rule is $20 - $25 in savings for every dollar of income you'll need in retirement. So if you needed $50,000 a year in retirement, you would need $1 million to $1.25 million in retirement savings when you retired.

Tree0164 · #4 (**permalink**) 01-07-2005, 02:23 PM

I was looking at Dave Bach new book (author of the The Automatic Millionaire)

According to Bach, there is not one magic number that everybody should have saved. Instead, the amount that is right for you depends on your income. The basic rule of thumb here is something that Bach calls the 1-5-10 plan.

At age 30, you should have one year's worth of income saved. This amount does not include any home equity that you might have. So, if you are 30 and making $40,000 a year right now, you should have $40,000 in savings.

At age 40, you should have five years worth of annual income saved (or, five times your annual income saved).

At age 50, you should have 10 years worth of income saved.

amomof4 · #5 (**permalink**) 01-08-2005, 02:51 AM

I just recently read that you need almost a much as you do when you work. It makes sense. You probably are not going to get rid of the extra car, or stay at home and do nothing.

The only way out is to scale down your living. You might be interested in "Your Money or Your Life" to see about scaling down your living.

Momtwo · #6 (**permalink**) 01-08-2005, 06:58 PM

We are spending as much in retirement as we did when we were working. There is no commute, so less gas. And some other expenses are less also but we now spend more money on entertainment and travel.

genchan · #7 (**permalink**) 01-10-2005, 06:41 AM

That is more than I expected. I will have to rework my numbers.

Tree0164 · #8 (**permalink**) 01-10-2005, 08:52 AM

Momtwo That is interesting. I was thinking that it would be similar. I want to be able to enjoy me retirement years. I would like to be able to travel and go out to eat.

Another goal is get your mortgage paid off as well. Uusally the mortgage is somone's biggest expense.

Momtwo · #9 (**permalink**) 01-10-2005, 01:05 PM

When we retired, we were debt free. We still are. We paid the mortgage and the cars off. We have always paid the cc purchases in full each month.

After we retired, we needed to purchase a new car, but we planned on buying it with cash. At the time, we were offered a 3 year- 0% interest loan. We said okay and kept out money earning for us! It has since been all paid in full!

Retiring with no debt is definitely the way to go!

DivaJen · #10 (**permalink**) 01-11-2005, 09:12 AM

That 1-5-10 rule is nice - easy to remember. Depressing, but easy to remember....

Tree0164 · #11 (**permalink**) 01-11-2005, 02:34 PM

It's depressing Jen.... I got our end of the year statements from Fideltiy today and we are no where near it. Hubby has 4 year until 40 and I have 6. No way will have 5x our income said for retirement.

One stupid thing was back in 1999 we borrowed from my 401k for a down payment on my car. Not good. : ( That $8k borrowed would have been much better in the the 401k.

JLP · #12 (**permalink**) 01-19-2005, 08:52 AM

Quote:

Originally Posted by genchan

How much money does a person need to retire comfortably? Is there a basic standard to go by?

First you need to know how much would make you comfortable now. Then, figure out what your life will look like at retirement. My thoughts are that you will probably need pretty close to the amount that you now live on. So, if it is $50,000 per year, and you will be retiring in 20 years, you will need $90,300 to buy what $50,000 buys now (factoring in 3% inflation).

It is recommended that you have enough money in a retirement nestegg so that you only have to make a 5% withdrawal each year to get your desired income. So, to figure that out, if you desire $90,300, divide 90,300 by .o5 and you get the grand total of $1,800,000.

Of course, you may be able to get by on less than that. But, keep in mind, you don't want to retire and have to live on bread and water.

JLP

http://AllThingsFinancial.blogspot.com

Tree0164 · #13 (**permalink**) 01-20-2005, 09:03 AM

Hey JLP nice blog Check it out for how much you need for retirement answer as well. Nice explanation there.

PennyPincher · #14 (**permalink**) 01-20-2005, 09:29 AM

Does the 1-5-10 rule assume that there will be no additional income after retirement? That is the fuzzy part for me.

My plan is to have an income from a rental property when I'm retired. My parents are retired, and have led by great example. Although my dad never made more than $45,000 (in NEW JERSEY - very expensive), they have 3 properties completely paid off. So, they are able to bring in $2,000+ a month on the 2 rentals. I'd prefer to count on something like that rather than stressing myself out thinking that I'll just be depleting savings.

I am on my way now that I own two places. I had a VERY rough fall when I was trying to rent it out, and almost got myself in over my head ~ but I see the tax benefits and financial upside down the road. If this is feasible for anyone now or as a goal, I think it's great!

Depressing to think about the cost of retiring!

JLP · #15 (**permalink**) 01-20-2005, 09:44 AM

Don't let it depress you. The main thing is to have a plan. First figure out where you are now. Next, figure out where you want to go. Then, connect the dots.

Are you close to retirement? You will probably be able to count on Social Security. That will help you.

Best of luck,

JLP

terry1156 · #16 (**permalink**) 01-20-2005, 04:00 PM

Quote:

Originally Posted by PennyPincher

Does the 1-5-10 rule assume that there will be no additional income after retirement? That is the fuzzy part for me.

Since it is a general rule to shoot for, there are a lot of personal factors you need to take into account.

Having an income from rental property is a great idea. This will mean you will not have to save as much to still have the same benefits. When I was preparing, I tried not to think of these extras since they give a big extra cushion when retirement comes around. So if you can, plan your retirement not taking that income into consideration if possible.

In your case this may not be possible since buying property is expensive and is similar to buying stocks. It is an investment and if you weren't putting your money into the houses, you could be putting it into retirement plans.

Tree0164 · #17 (**permalink**) 01-21-2005, 04:51 AM

As other have said that is a general rule.

I guess you could substract the income that you are getting right now from it and use the formula for the 1-5-10 times your income. If you have the investment properties paid off, you would be golden.

David Bach does talk about real estate investing in his latest book and planning for retirement. You may want to check it out from the library.