How much is enough to retire on?

[iliketosavemoney]

Trying to learn more about saving for retirement (and personal finance in general) is great but I think it also started an unhealthy obsession with checking my accounts all the time and just thinking about my budget and money way too much. I check my accounts multiple times a day even though I know there is no change!

I'm thinking that maybe I just need to simplify everything so I can stop wasting time and energy worrying about my finances and just enjoy other things.

So my plan is to just set aside X amount for retirement and to STOP thinking about it. The problem is how much I need to save. I've been playing with retirement calculators to figure out how much I need to save to retire but there's just too many variables.

This month, I've started maxing my Roth 401k and my wife and I both max our Roth IRAs. I want to just save this and spend the rest of our money (or what little is left of it after expenses) on anything we want. (Of course, we'll pay off our car loan and student loan first before we spend anything on ourselves)

Think this is okay? or am I going to shoot myself in the foot with this plan?

[parafly]

This is a difficult question to answer generally since it really depends on an individual's personal circumstances.

As a general guideline, saving 15% of your gross income for retirement is the common benchmark. If you are nearing retirement and need to "catch up," this percentage should be raised accordingly.

[bjl584]

Shoot for 15%. But, if you can comfortably save more, then do so. Save as much as you can.

I've been saving around 28% for the past 5 or 6 years and I don't feel that I'm missing out on anything or not living life to the fullest.

[KTP]

Save half of what you spend each year and you will be able to retire in about 20 years.

A % rule is somewhat meaningless. If you make $5,000,000 a year and live on $50,000, you do not *have* to save 15% each year.

If you spend $40,000 a year and can save $20,000 a year, then in 20 years you will most likely have saved enough to generate $40,000 a year from your saving throughout your retirement.

If you spend $100,000 a year, try to save $50,000.

Note that you don't count saving as part of the spending.

Edit: We advanced the formula a little bit because we wanted to retire faster than 20 years. We save about 200% of what we spend each year.

[TBH]

I can relate to getting obsessed with checking account, etc. I had to step back too. So I set our savings percentages and I reevaluate our progress once a year. In between I try not to think about it too much because it's not good for my mental health.

[Retired To Win]

The conventional answer to your question is to take your annual expense budget and multiply it by 25. And THAT is how much you need to retire (supposedly).

I have a different philosophy about it. I've set it out in my blog post "My Financial Independence Key" at http://retired-to-win.savingadvice.c...arating_106169.

See what you think!

[rennigade]

The conventional answer to your question is to take your annual expense budget and multiply it by 25. And THAT is how much you need to retire (supposedly).

I have a different philosophy about it. I've set it out in my blog post "My Financial Independence Key" at http://retired-to-win.savingadvice.c...arating_106169.

See what you think!

Stop trying to route people to your blog posts.

Mods...this may be a good time to flex your muscles and lay down the law.

[Petunia 100]

How much is enough? There is no one answer. I suggest you start reading early retirement blogs to see some alternative points of view. For example, Jacob Fisk of Early Retirement Extreme retired quite young, and lives on 7k per year. Mr Money Moustache and his wife and son live on 28k per year. MMM is in his 30s and already retired.

[MakeAStash]

You need roughly 25x your annual expenses if you retire at age 65, 30x at 55, 35x at 45, and 40x at 35.

[KTP]

How much is enough? There is no one answer. I suggest you start reading early retirement blogs to see some alternative points of view. For example, Jacob Fisk of Early Retirement Extreme retired quite young, and lives on 7k per year. Mr Money Moustache and his wife and son live on 28k per year. MMM is in his 30s and already retired.

Well, Jacob didn't stay retired, he now works as a quant making big bucks. Probably still lives on 7k a year though, the cheap bastard.

[snafu]

liketosave, you've not mentioned what you and wife have chosen as your ROTH and 401k specific investment products. What fees, what MERs? Have you read The Automatic Millionaire [Bach] or The Millionaire Next Door [Danko]?
Rather than focus on the money aspect of retirement once 401k & ROTH are funded I suggest developing interests and skill sets that you might enjoy now and future years.

[Nika]

15% is a very vague number without more specifics. Compare 15% starting in early twenties and 15% starting after forty.

But if you can max out tax advantageous accounts, chances are you'll be ok.

[NetSkyBlue]

Mr. Money Mustache says 25x the annual amount you intend to live off of in retirement, including early retirement. He assumes a withdrawal rate of 4%, but encourages early retirees (30's, 40's, 50's) to have either a part-time job or other lines of income to be able to take less than 4%.

[iliketosavemoney]

Thanks for all the replies and suggestions.
I'll try to check out the books when I can and I started reading on MMM's website.

As for my 401k, its invested in Spartan® 500 Index Fund - Institutional Class through Fidelity which has a .05% expense ratio and both our Vanguard Roth IRAs in Vanguard Total Stock Market Index Fund Admiral Shares which also have a .05% expense ratio.

I tried working backwards from what we're saving now to see how much we'll have when we retire at 65 (I'm 32). I kept the tax rate now and in retirement at 25% and a return rate of 5%.
-Maxing the Roth 401k until I retire at 65 will be about 1.4 million.
-Each Roth IRA will be around 450 thousand each.

That means we'll have 2.3 million at retirement? If the math is right that is more than enough for us to retire on and we can probably retire a little earlier.