Mikael Rieck is the author of more than hundred articles on topics of how to make money both online and offline. He has been online since 1999 and has always had a passion for money making opportunities and teaching others how to make a profit.How Much Money Do I Need To Retire?
That is a question that a lot of people are asking themselves and I have to admit that I have asked myself that question more than once. But some years ago I found out that the question wasn’t relevant for me to answer because I was not going to settle with the minimum amount that I would need in order to just get by.
Instead I want to have so much money that I will not be able to spend them all no matter how hard I try. Can it be done? Absolutely! Will I make it? Well… since I am working on my hobbies, enjoying every minute of it and don’t even consider it “work” I’ll probably never retire but feel free to call me up in 35-40 years and I’ll be able to give you a better answer.
But if you’re not like me but want to know how much money you will need to retire then it is actually something that has a quite simple answer in the form of another question:
How much do you need in monthly income in order to survive when retired?
If you don’t know the answer to the question you’ll not be able to get an answer to the first one. The reason is that if you say to yourself that you will need one million in order to retire you might be right if you are able to live off a few thousands per month. If you instead are planning on travelling the world and spending 10,000 each month then you’ll quickly run out of that million.
The second question you need to ask yourself is:
How long are you planning to live?
The longer you’re planning to live the more money you’ll need in order to retire. If we assume that you’re going to retire early at the age of fifty then you’ll statistically have about 25-30 years left to live. If we assume that you’re going to die age eighty then you’ll need enough money to support yourself for 30×12 months = 360 months. With a monthly need of 3,000 then you would need a total of 1,080,000 in the bank. If on the other hand you are planning on giving it all you got and spend 6,000 per month you’ll need double that amount (2,160,000). For most people that is a fairly large amount and that is why you need to start planning NOW.
If on the other hand you are planning to keep working your job until the age of seventy then you’ll statistically only have 10 years left to live and you’ll be able to get by with a lot less in savings. 3,000 per month in 10 years would require 360,000 in savings.
So the main three issues when you ask “how much money do I need to retire” is that you’ll need to save an increasingly larger amount if you want to retire early. You’ll need a larger amount in savings if you want to spend a lot of money when retired and finally you’ll need to look at your lifestyle and make a guess at how long you’re expecting to live.
But what about compounding interests you might say?
I am a big fan of compounding interests and they will definitely play a huge role if you start your savings at a fairly young age. Compounding interests won’t do you much good if you only have a few years for them to “to their job” but they can work wonders if you’ll let them do their job for 30, 40 or 50 years.
Secondly I personally think that it is a bit risky to plan your retirement based on your guesses on the interest rates of the future. Nobody knows what they are going to be. Nobody knows how taxes will evolve and nobody can predict how inflation (or deflation) is going to affect our savings and investments.
When you hit retirement age it is often too late to say “I wish I had….”. So start planning now and my advice is to plan to have a fortune when you retire because even if you miss the mark you’re more likely to be further down the road than if you had planned for a minimum outcome.
To your success,
Mikael
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