How Much Money Do You Need to Retire?
How much money do you need to retire? What a big, gnarly question. If you’re thinking, “I don’t have any idea!” then you’re like most of us. I often think that people walk through life just trying to “save as much as I can”. The problem with that is that it’s a vague goal that’s tough to accomplish. It could mean $10,000 or $10 million. And it probably does.
I look at my retirement savings – or as I like to call it – my financial independence, the same way I look at anything that I want to own but don’t own yet. I want that car? I know how much it costs and I put the money away until I can afford it. I want that purse…that house…that pair of shoes…that school for my child… start planning. Retirement is no different except that we don’t know how much it’s going to cost…so sometimes it feels easier to ignore the whole thing.
Turning a blind eye is very Scarlet O’Hara and so very UN-Rich Women Rock. So let’s face this head on. Let’s find your number.
First. What do you want?
I call this exercise: The Movie of Your Life. Put up the big screen, grab some popcorn, and spend an afternoon thinking of all the things that you want to get to do in your lifetime.
At what age do you envision relying on your savings to live?
What’s on your bucket list?
- Do you want to chuck corporate America, make and sell pottery on your (new) New Mexico ranch property?
- Do you want to dedicate your spare time to a philanthropic cause that you love?
- Do you just want to have enough so that you can afford to fly your extended family home to your house
Now that you know what you want to do, you have what you need to figure out what your number IS. Ready?
For example. If you are planning to retire in 2035 at the age of 65 and you will need the equivalent of $100,000 a year, in today’s dollars to live on, the math would be as follows:
Age 65 in 2035: $180, 611 for year 1
2036: $186,029 for year 2
2037: $191,610 for year 3
Age 95 in 2085: 438,390 for year 30
Source: Future Value Calculator: 3% inflation compounded annually, gross of taxes. Hypothetical example above is for illustrative purposes only and is not representative of any investor experience. Individual results may vary.
This math roughly equates to a number of $5.3 Million dollars needed for retirement. And that’s without counting big increases in demand on your income such as a second house in warm weather, or paying for a grandchild’s college tuition. For those “Movie of your Life” items, I recommend literally pricing them out and adding them to your 5.3M income number.
Now, this number might feel REALLY SCARY TO YOU. But don’t turn away! Just like any monster, it gets less scary the longer you look at it. There are ways to get to this number – by breaking it down to manageable steps. Remember, we are going to take what you can save and build value by investing and building up your assets. These are topics that we are going to visit again and again at Rich Women Rock.
In the meantime, congratulations on starting to define your number. Women are often very visual, so defining the number that you will need to retire is a HUGE STEP in your growth. I am so proud of you already
You’ll be rocking in no time.
Download the Movie of your Life Worksheet below!