Do you have any idea how much money you really need by the time you retire? If you don’t, don’t feel bad. To be honest with you, even I have never calculated how much I would really need in order to retire. So how can we begin to figure out a number that will allow us to retire and live our lifestyle of choice? Well, I have searched around a bit for an easy answer and I found that even the “simple” answers are complex.
MSN Retirement Calculator
MSN has a retirement calculator on their website and it looks something like this:
This, however, is still pretty complex. When I put my numbers in there, it was saying that I need $250,000+ per year to live… yeah… I don’t think so. You may use this tool, but I am going to give you a much simpler process to find out how much money you will need for retirement. In fact, you will only have to answer one question for my calculation!
Editor’s side-note: Please note that there are two ways to retire well. You can develop a consistent cash flow through various business ventures, or you can build a nest egg of money and live off from that. Since not everyone is a natural business owner, I will only be speaking to those that plan to build up a nest egg for retirement.
One Simple Question to Find Out If You’ll Have Enough For Retirement
In order to find out how much money you will need in order to retire, simply follow the one question process below!
1) How much would you like to live off from per year when you retire (in today’s dollars)?
For me, I would like to live on $50,000 a year. I plan to be debt free, so $50,000 should give me quite a lot of freedom to buy a few things and travel (oh, and pay for a couple of old-age surgeries and pills that I will no-doubt need in those later years).
Now obviously $50,000 today won’t be worth the same amount in 40 years (meaning, today $50,000 might buy me a simple condo, but in 40 years it might only buy me a simple car). Based on history, every 20 years our money becomes half as valuable. So let’s say I am retiring 20 years from now and want to have a $50,000 a year lifestyle. When I retire, I will actually need to pull out $100,000 a year. So how much money should I have put away to do that?
My answer: 25 times your yearly amount.
So, if you discovered that you will need to withdraw $100,000 a year, then you should plan on saving up $2,500,000 in your nest egg. I know that might sound like a huge number, but it is entirely possible if you make a plan to start saving today. At least now you know how much you should be saving to have enough for retirement!
How much money will you need in your nest egg?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.