Do you know how much money you will need to retire well (independent of Social Security)?
There are many ways to calculate an estimate, but I really like the Retirement Nest-Egg Required calculator that we have placed in the FREE TOOLS section.
To calculate your number, you will need to know two numbers:
- The annual amount you want to live on at retirement (in today's dollars)
- The number of years until you retire
Suppose one wants $50,000/year (today's dollars) during retirement and plans to retire in thirty years. Punch the numbers into the Retirement Nest-Egg Required calculator and this is what you will see:
Because inflation erodes the spending power of money, the annual amount we want must be adjusted. Using an assumed inflation rate of 4%, one will need $162,170/year in thirty years to have the same spending power of $50,000 today.
At different rates of return, you can see different amounts that need to be saved. Eight percent is a common rate of return on investment that financial planners use.
What is your number? Are you going to achieve it?