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  • Mark Fonville, CFP®

How Much Money Would It Take For You To Comfortably Retire Right Now?

How Much Money Would It Take For You To Comfortably Retire Right Now?

Do you know how much money it would take for you to retire comfortably right now?

Once you can confidently answer this question, you’ll be able to understand your retirement timeline better.

Even if you aren’t quite ready yet, working through this poignant question can help you see if you are on the right track.

So how do you find the answer?

Here’s a process we recommend working through to find your ideal retirement savings “number.” Before you get started, download our master list of retirement goals. You may find it helpful as you think through the steps.

Make An Honest Calculation of Your Current Expenses

When was the last time you consulted your cash flow plan? Do you have a solid grasp of all your expenses? Have you taken the time to organize and tally them? Do you know your annual income?

If not, this is an excellent place to start.

You may be surprised by what you find as it’s easy to underestimate what you’re honestly spending each month/year/etc. Yes, the extra evenings out and longer vacations add up, potentially more than you realize in the moment.

Check each account you spend from, like checking accounts, credit card statements, or cash, and see what you’re truly spending each year. A solid rule of thumb is aiming to replace about 80-90% of your pre-retirement income for your golden years. Why so much? Your retirement expenses likely won’t dip as significantly as you think.

Add it up and get a number!

This exercise lets you see your current level of annual spending and shows you how much income you’ll need just to maintain your current lifestyle. For example, if you spend $5,000 per month, that's $60,000 per year. Multiply that by the number of years you think you’ll spend in retirement, 30, for example, and it really highlights how much you’ll need.

Keep in mind you’ll also have to factor the current and future inflation rate into those projections. $5,000 in today’s dollars likely won’t be worth the same 5 years from now.

Put Real Numbers To Your Big-Ticket Retirement Lifestyle Goals

Next, think about significant retirement spending goals that aren’t reflected in your current budget. If you are already spending on a particular category, think carefully about how that spending might change as you move into your new retirement lifestyle.

For example:

  • How much is your present travel budget? Will it increase in retirement? For example, if you live farther away from children and grandchildren, you might spend more on flights or gas to see them. Or you have a long vacation travel bucket list of adventures to book. Are you planning on making a move? Out of state? Downsizing? Snowbirding? Purchasing a vacation property?

  • What is your projected retirement age? Knowing when you retire will give clues into how much money you’ll need to do so comfortably. Retiring at 55 (early retirement) may look different than retiring at 62, or 67 (full retirement age for those born in 1960).

A little tip: Don’t fool yourself into underestimating the cost of your goals. If you do, you run the risk of undershooting your savings target.

Say you plan on moving out of state. Have you considered the cost of property in your new area? What about practical things like property taxes, homeowners insurance, state taxes, healthcare, etc.? Is the cost of living comparable, or will you spend far more on a night out, golf club membership, or a weekly trip to the grocery store?

By not being honest about how much your big-ticket retirement goals will cost, you may have to scale back your retirement vision, work a few years longer, or find additional stress regarding your money—that’s not the retirement you want or deserve.

Add it up and get a number!

Look Closely At Your Health

People are living longer than before. While you may think it makes sense to project your retirement plan to your 80th birthday, that notion might be outdated. At age 65, the average life expectancy is still 18 years for men and a little over 20 for women.

In addition to longer life expectancies, many retirees have a goal of living longer lives. A new Edward Jones Age Wave report found that although retirees are stressed about outliving their savings, nearly 70% of Americans want to live to 100. The people in the study cite 100 as the “ideal length” of time for retirement.

So whether you want to live longer, you’re more likely to live longer, or a combination, it’s critical that your finances can keep pace.

Consider how your present health and family history might affect your longevity, and come up with a reasonable estimate of your personal life expectancy. But use a healthy dose of caution.