Most people I talk to hope to retire some day. Almost everyone of them gives me an age at which they would like to retire at, but rarely tell me how much they will need in retirement dollars when they retire.
Your ability to retire should not be based on age but on the amount that YOU will need in order to maintain your standard of living without working.
This calculation can be cumbersome and complicated to figure out if you don’t know the factors that should be considered.
First and foremost, you need to determine your payoff date for all your unsecured debt. Many people continue to add on and service their debt until death. This is a very unhealthy way to live and will not privilege you with a dignified retirement.
The key to planning for retirement lies in the necessity to be debt free before that time begins. Once you are debt free and you own your home, then the calculation becomes very easy.
Here is a real life example. If you and your spouse make $60,000 a year and service a $500 a month debt payment, a $650 mortgage payment and a $250 car payment, then your actual retirement monthly requirement will be only $2350.
Here is the calculation: If you and your spouse are making $60,000 a year, your estimated take home per month is 75% of that divided by 12 (months) which is $3750. Then you want to subtract all your debt payments from that amount since you need to be debt free to retire. The $3750 minus the $500 monthly debt payment, the $650 mortgage payment and the $250 car payment will give you a monthly requirement of $2350.
The $2350 requirement over 12 months will equal an annual requirement of $28,200. In order to secure this amount, your retirement investments will need to produce that much in interest every year. If you conservatively get 5% a year return, then your retirement dollars need to be $564,000 in order to maintain your standard of living.
Keep in mind, that many retirees will receive some type of Social Security Benefit, but conservatively, the number above represents a true number.
Every family is different, so contact me to find out what your retirement dollar amount needs to be, so you too can retire with dignity. [email protected]