How much $ is enough for retirement?

[Snydley]

I saw on another post that someone is planning on having 5 million in their retirement accounts, and I will never reach that number I don't think. As of now, with retirement maybe 15-20 years away and less for DH, I was planning on 2 million in retirement accounts, 1 million in equity in real estate, and hopefully no debt (outstanding loans). Is that enough? We like to travel and eat at nice restaurants but otherwise don't live upper class (don't buy expensive cars, clothes, etc).

[Smallsteps]

I think a person is really in the position to see what they personally will need in retirement. There are way too many variables in the equation to come to a one size fits all #.
Many people have different situations...... different cost of living /different priorities/ different tax situations and even different health situations. No one knows how long they will live. Many people that I assumed would live long ( health fanatics) passed away suddenly and some I never thought would reach a certain age are still going strong.

I feel too many get caught up with some random $ number for retirement and some people I have actually heard say "well I can't reach that X amount so why bother" . I believe this is why so many polls now say people think they will never retire because they are comparing their finances with this ever increasing assumption of needing X amount and anything less just won't do.
It is one of the most frustrating things I see in discussion or written in "financial" articles etc.

[corn18]

Start simple. Use the Trinity study that found that having 25x expenses in a 60/40 portfolio will be enough 95% of the time for a 25 year retirement. There is a lot packed into that statement, but it is a good place to start. If you think you can live on $50k / year, then $1.25M is enough. $100k expenses = $2.5M.

From there, it can get really complex. Pensions, SS, changing expenses, early retirement, etc... all play into your "number". But that is better handled when you get closer to retirement and the question changes a bit. I no longer look at how much do I need as much as how much will I have and is that enough? I could work until I am 60 (53 now) and we could spend $200k a year after that. That's nice, but what if I want to retire next year? or the next year? It's the One More Year (OMY) syndrome.

[LivingAlmostLarge]

snydley, I think it depends on how old you are at retirement and where you live, children, etc. I am pretty sure I'm the $5M person, but I was thinking that's not what we spend drawing $250k/year but I'm hoping high because I don't know what medical will look like for us at 55. I don't know what we are giving the kids. I think that the closer you are to retirement the easier it is to plan because you'll know where you might live and can start to guess at more medical costs (which is changing I feel like crazy since we aren't sure what the US is doing). I think it also gives you a firmer handle on expenses and savings rates. The best you can do it save at this point.

[disneysteve]

As others have said, your number totally depends on your expected spending. I'm going with the 25 times expenses calculation. We currently spend about 7K/month so 84K/year meaning we need about $2.1 million using the 4% withdrawal rule. I'm 55 and we've got about $1.3 million now. With ongoing contributions and growth, I'm hoping that about doubles in 7 years which would put us at $2.5 million or so when I'm 62 which is about when I'd like to be able to retire if I want to.

Of course, there are other factors like medical expenses and Social Security. There's also the question of whether or not you would continue to do any sort of paid work after retiring from your career. Even a small part time job or some hobby/craft work can go a long way in stretching your nest egg.

[kork13]

Start simple. Use the Trinity study that found that having 25x expenses in a 60/40 portfolio will be enough 95% of the time for a 25 year retirement. There is a lot packed into that statement, but it is a good place to start. If you think you can live on $50k / year, then $1.25M is enough. $100k expenses = $2.5M.

From there, it can get really complex. Pensions, SS, changing expenses, early retirement, etc... all play into your "number". But that is better handled when you get closer to retirement

25x expenses is a pretty good, safe baseline to start from, and that's generally what I'm looking toward. In today's dollars, I'm looking at $2M-$2.5M, or ~$6M (inflated to ~2040). As corn said, alot of other factors come into play, but you really can't know for sure what you're looking at until you're within 1-5 years of retirement. Even then, it'll depend alot on decisions you make (for example, when to draw SS or if you have a survivor benefit on a pension). So I generally just look at it with the philosophy of "save what you can, when you can, then wait and see."

[Jluke]

As others have said, your number totally depends on your expected spending. I'm going with the 25 times expenses calculation. We currently spend about 7K/month so 84K/year...

That 7k surprises me.

no mortgage
no car payments
college done and paid for?

Still well below your income.

[disneysteve]

That 7k surprises me.

no mortgage
no car payments
college done and paid for?

Still well below your income.

Yeah, it's a lot and could be better but we're saving 30-35% of my income so we're doing okay.

About 10% of that figure (just under $700/mo) is for property taxes and insurance so there's that. Yay New Jersey.

[rennigade]

Most people retire with less than a million, dont kid yourself. Sites like this and much much worse, bogleheads, can mess with your head. A lot of members over there have 8 figure portfolios...and a lot of mid 7 figure ones. That is not the norm.

As for whats your number...only you can calculate that. There are rules of thumb...its all about expenses. How much do you spend? If you're not tracking, it makes it more difficult to figure out.

[cypher1]

As others have said, everyone's situation is unique. I don't see myself married, nor having kids. While still healthy, that could change at any time. Right now I'm going with the 25x annual expense rule for a base, which is probably still pretty low. My monthly expenses are easily under 2500 even with a mortgage, but I rounded up to 3000, and come up with 900K. So my retirement goal for now is 1 million, which I expect it to mostly likely increase over time.

[ua_guy]

If time and income are still on your side, the first question to ask is what do you want retirement to look like? Then come up with a figure that supports that, within reason. Your existing lifestyle will give you a good basis. What are your expenses right now? How will they change in the future?

Retirement calculators will blow your mind...many of those make asinine assumptions which may not be true for your scenario. Take them with a grain of salt.

[jIM_Ohio]

There is a 4% rule which is the 25X multiplier. The variability of this number is volatile- for example a more conservative retirement plan could be 3.5% and 4.5% would be considered "high risk" with a 5% withdraw rate (20x multiplier) being considered close to "living on the edge".

My parents are retired, and their account balances have increased every year of retirement, even with RMDs and an investment adviser taking a cut of their assets.

[Nutria]

I took my current monthly budget and modified for the realities of retirement (no 401(k) or other savings, replaced health insurance premiums with Medicate Advantages, etc) then increased it all by 2.5% inflation for the number of years until I retire. Multiply that by 12, and that's how much I guess I'll need at age 65.

And knowing how much I have now, estimated contributions to 401(k) until I retire, and a conservative 5% CAGR until I retire shows how much I'll hypothetically have at ages 62, 65, 66 & 67. (Spreadsheets are wonderful!)

From there, I make a spreadsheet that's basically an annuity where my yearly budget grows with inflation.

Including SS, retiring at age 67, and assuming a 5% CAGR before and after retirement, with 2.5% inflation before, and 3% inflation afterwards, I only need $468,500 to die penniless on my 81st birthday. Without SS, I'll only need $850,000. (Naturally, these are sterile forecasts.)

[disneysteve]

I only need $468,500[/B] to die penniless on my 81st birthday.

And then what? What made you only calculate until you turn 81? You may live to be 90 or 95 or even older. My mom was 89 in August and is still doing pretty much okay, living on her own, etc.

[Nutria]

And then what? What made you only calculate until you turn 81? You may live to be 90 or 95 or even older. My mom was 89 in August and is still doing pretty much okay, living on her own, etc.

1. I'm not in the best of shape or health.
2. That's about the current life expectancy for a 65 year old.