Setting the Target Amount for Retirement

[elessar78]

I don't know what it's like to be old. I assume I'll have a paid for house, need to see the doctor more often...

How do I go about setting a number to aim for our retirement? The plan is to work as long as I can, then dial back accordingly when I'm older and hopefully only work to stay busy and not need the income to survive. Yeah, things happen where you may not be able to work, so that needs to be factored in as well.

Up to now, it's been plan on working until 65 and plan to live another 30 years. For example, I estimate we need 100K/year so we need a $3,000,000 retirement account? But that's in today's dollars. Health care, food, gas, daily things, elder care, will all cost more $$.

[bjl584]

One rule of thumb is that when your account balances equals 20X your income. So, if you make 50K a year, then 50000 x 20 = 1million.

25x is even better, and can pretty much ensure that the money lasts beyond your life. So, 50000 x 25 = 1.25million.

But, the more the better.

[elessar78]

Without turning this into a political thread, can I, a 30-something, count on social security benefits in my retirement?

[Petunia 100]

IMO, a good approach is to work backwards. How much will you need per year? Assume a 4% withdrawal rate, multiply your desired annual income by 25, and there you go.


Also IMO, yes, SS will be here. Will it be means-tested at some point? Entirely possible. Will 3m in your retirement accounts disqualify you? Maybe.

[bjl584]

Without turning this into a political thread, can I, a 30-something, count on social security benefits in my retirement?

It will probably still be around, but it may be different from what it is today.

Personally, I'm not including SS income in my retirement planning. If I don't receive it, then fine. If I do, then that will be that much more extra income i will have each month.

[snafu]

It's smart to track how much you contribute to SS each year and totals amassed over the years.

[StellarSaver]

While the 25x rule will give you a good quick-and-dirty answer, you might want to take a look at a good retirement savings calculator like FIRECalc: A different kind of retirement calculator. This is one of the best all-around sites I've seen for coming up with a reliable estimate for how much you'll need to retire.

[Shewillbemine]

I'm all for calculators and formulas because they're fun to use, in a Trivial Pursuit kind of way.

But let's sprinkle a little reality here: you'll save what you're able to save. You're young right now and it's unlikely that you have reached any type of retirement goal at this point. Maximize what you can for your retirement funds and that's pretty much all you can do. If a calculator tells you that you should save $500/month at a 4% annual interest over the next 30 years BUT your cash flow only allows you to save $200/month...well, you're gonna have to go to extra lengths such as decreasing spending and increasing income.

At the very least, match what your company's 401k policy matches. Then, try to max out your contributions in 401k and Roth IRA/IRA accounts. Lots of people don't even make it that far. If you have, then check if you're still falling short and adjust accordingly.

Also, don't forget to live life once in a while and enjoy your hard-earned money. When you're retiring and a millionaire, no amount of money can help you regain some sensible (and not so sensible) youth-appropriate frivolity.

[ecoadapt]

Without turning this into a political thread, can I, a 30-something, count on social security benefits in my retirement?

It will be there for sure but like Brian said it will be different from what it is today and in the future! Although,it will be better if you don't depend much on SS.

[97guns]

While the 25x rule will give you a good quick-and-dirty answer, you might want to take a look at a good retirement savings calculator like FIRECalc: A different kind of retirement calculator. This is one of the best all-around sites I've seen for coming up with a reliable estimate for how much you'll need to retire.

that calculator has me eating out of a soup kitchen

[photo]

Without turning this into a political thread, can I, a 30-something, count on social security benefits in my retirement?

No, and because so many people think of it as an entitlement, they are woefully unprepared for retirement. I wouldn't count on anything other than your own preparations.

Also, you should plan on working until age 70 -- at least.

[jteezie]

Firecalc is definitely the best calculator out there. You can adjust some variables to try to improve the outcomes, but if it's not working out... you better change something immediately.

[Stock_Xchange]

You could also use the basic projection method.

Take your current income now, = $x
calculate the amount of EARNING years your project to have left.

If it is under 10 years, you need to save 90% of your current income to maintain a reasonable standard of living,

Under 20 years you need to save between 70-80%

Under 40 Years 40-60%

This being said, consider Annuities, and retirement vehicles that will give you a projection as to the value you will have.

Either way, with inflation and other factors, it is safer to project based on figures now, then it is to take a number and factor in withdrawals, because if you figured you needed $3MM and only factor what you will take from it, you will overlook the income potential in safe securities that the $3MM can generate= Fixed Income.

Also go to American Funds website they have a great retirement calculator for you!!

[GREENBACK]

If it is under 10 years, you need to save 90% of your current income to maintain a reasonable standard of living,

Under 20 years you need to save between 70-80%

Under 40 Years 40-60%

Am I missing something? I'll give you 40% as a real stretch but who can save between 70 and 90% of their income unless someone else is paying all of their other expenses? Maybe I'm misunderstanding your post. I also take exception to your recomendation for annuities. They are almost always a bad choice for the vast majority of people.

[elessar78]

FWIW, I only brought up the social security angle because almost every calculator I've used asks about it. I never figured it as part of my calculation before I looked online.