Do you want to always be under the control of “the Man”?
I didn’t think so …
Retirement is a common goal in the workforce, but a universal answer about how much is needed to retire comfortably can be tough to find. Lifestyle, commitments, health and personal choice all conspire to make a consensus impossible.
Fortunately, while it may be difficult to find an easy answer, finding the one that applies to you can be pretty straightforward. It’s all about finding the cost of being you.
What does that mean? Well, most people retain the same personality, interests and hobbies for their entire lives, and that includes after retirement. The only difference is that you will have to fund your existence without a steady paycheck.
Expenses such as housing or car payments, food, entertainment and health care will remain after you retire, and must be factored into an accurate estimation. If you plan to travel or pursue other interests during your retirement, your cost of existence goes up even more. Therefore, the question goes from “how much do I need to retire” to “how much does a year of my post-retirement life cost?”
How to Determine Your Retirement Goals?
Generally, a person should save at least one years’ salary for every 3 years of his career. This means that someone who starts saving at age 30 with a salary of $40,000 and plans to retire at age 70 would save over $530,000, enough to keep him near his working salary for nearly 20 years after retirement and ensure that he will be able to live the lifestyle to which he has become accustomed. Of course, it is always advisable to provide yourself a cushion in case you live an uncommonly long life. The blessing of living to 100 should never be accompanied by the curse of having to unretire because you have outlived your savings.
The best way to find out how much you’ll need for retirement is to identify your individual expenses and adjust your strategy to ensure they are financed. Instead of aiming for the maximum possible return on your investment, choose investments that are most likely to get you to your specific goal with minimal risk. Reevaluate your goals yearly in case your life gets more or less expensive.
Retirement needs are as individual as the people hoping to retire, and so it is nearly impossible to generate a golden number that will work for everyone. The cost of being you doesn’t go down drastically just because you’re retired, but prudent planning can guarantee that you can afford to do it for the rest of your life.
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