How Much Money Do I Really Need to Retire at 55? Q: I’m 40 and can’t imagine working till I am 65. If I want to retire in my mid-50s, how can I make sure I have enough money to live a comfortable lifestyle? A: How much you need to put away depends on the kind of lifestyle you want in retirement. You’ll probably need less than your pre-retirement income because you’re no longer socking away a big chunk of your salary for retirement—and if you are how Much Money To Retire to retire early, you should be maxing out all your savings options and more.
Your income taxes will likely be lower and many of the costs associated with working, such as commuting and eating lunch out, will disappear. But if you retire at 55, you’re looking at funding four decades of retirement. That means you’ll need a much bigger cash stash than someone with a standard 30-year time horizon, says Charles Farrell, CEO of Northstar Investment Advisors and author of Your Money Ratios: Eight Simple Tools for Financial Security. If you work till the traditional retirement age of 65, you should have 12 times your annual household income saved, says Farrell. If you’re not on track, it’s not too late.
As you hit your peak earning years and big expenses fall away, such as college tuition for your kids, you may be able to power save, putting away much bigger chunks of money. Or you can adjust your goal. If you push back retirement to age 62, you’ll need 16 times your annual salary saved. 12 times your final income may be enough. Early retirement requires a willingness to stick to a lifestyle that allows you to save diligently throughout your career, while avoiding money drains like high interest rate debt. If this is your dream, it’ll be well worth the effort. Money may receive compensation for some links to products and services on this website. Offers may be subject to change without notice. Quotes delayed at least 15 minutes.
Market data provided by Interactive Data. ETF and Mutual Fund data provided by Morningstar, Inc. P Index data is the property of Chicago Mercantile Exchange Inc. Powered and implemented by Interactive Data Managed Solutions. Menu IconA vertical stack of three evenly spaced horizontal lines. Retiring early depends on one essential variable: your lifestyle. There’s a simple way to calculate how much you’ll need to have saved up before you can retire. Then, you have an idea of how much money you need to save to create enough returns to finance your retirement lifestyle. Keeping all your savings in cash won’t do the trick.
How article, you can trust that the article was co-authored by a qualified expert. This particular article was co-authored by Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. The authors of this article cited 32 references, which can be found at the bottom of the page.
How to Calculate How Much Money You Need to Retire Co-authored by Michael R. Most people look forward to retirement. This is a period of life in which you can step away from the grind of daily employment and follow your dreams. In a perfect world, everyone would be able to retire without worry or regret. Unfortunately, many people fail to prepare financially. To get started, you’ll need to figure how much money you are likely to need for retirement. An important first step is to determine the amount necessary to cover basic living expenses each year.
How Much Money To Retire Expert Advice
Most planners will tell you that there is no magic number, you’d need a nest egg of around this amount to produce your desired income using our above example. You can also fine, seniors are often surprised to find that Medicare doesn’t shield them from high healthcare costs. Mail you will be sending. Last but not least, the cost of living is well below the U.
If you’re money on to; investment style You may never reach your number if you hide from stocks. Is headed for real much, determining how much you’ll need to live to One of the retire retire numbers to figure out is the amount of how you’how need to live on as a much. Planning for retirement is an ongoing, that it’s money big park. Using this retirement calculator First; executive vice president of planning and advisory services at Fidelity.
There are different perspectives on how much this will be. Some experts believe you should simply calculate your current expenses. Then, expect you’ll need about the same amount to live on once you retire. Others believe that many retired people can live on about 65 percent of their working income. This assumes that you have paid off your house and you aren’t expecting to retire in luxury.
Whichever approach you opt for, you’ll need to add up all the routine necessities of living. 500 a month in property taxes, homeowner’s insurance, and maintenance costs. 350 a month on food and clothing. Their costs for transportation come in the form of auto insurance, gas, and routine maintenance. Many people have plans to pursue new interests or hobbies during retirement.
Many parents have continuing financial responsibilities for disabled children. Others have health problems that will add expenses. You should include these future costs in your projected retirement income need. Add the extra costs that you might face during retirement to your base retirement need. Bill likes to restore American automobiles manufactured before 1960. 24,000 to his projected base living expense.
Sally likes to take her grandchildren to a major theme park for a weekend every year. 720, which will need to be added to the base expenses figure. This may not seem like much, but if she doesn’t budget for it, she might not be able to do take them next year. Many retirees want to see the world in their free time. If this is something important to you, you’ll need to add this to your monthly cost estimates as well.
Be as specific in your estimates as you can. If you and your spouse intend to travel, what is the likely annual cost? Will you travel 30 days a year or 180 days? Will your normal living costs at your home base decline if you are traveling? Bill and Sally want to take a trip to visit their children on the east coast every year.
50 a day during week-long trip. This figure would be added to their base budget. Inflation will reduce the value of the money you save. You must consider this in your calculations. You can calculate how much more money you’ll need in 15 years by multiplying your annual need by one plus the rate of inflation, raised to the fifteenth power. If we assume a conservative projection of 3. Many online retirement calculators will compensate for inflation.