Retirement is something everyone dreams about.  Even those of us who have the luxury of loving our jobs, would still like to retire, or at least slow down eventually.  However, after talking with many of my clients, I was shocked to see so many of them have never thought about how much they will need in retirement.

The first thing to consider is social security. There is no disputing that the social security program is in trouble.  Experts are all over the place on how to fix it, or if it can even be fixed.  So as far as planning goes, do you want to rely on a failing system? As a general rule, I like to follow the Boy Scout’s motto, “Be Prepared.”  For this I  plan as if it won’t be there, and will be pleasantly surprised if it is.  (Much safer than counting on it and it being gone!)

The second thing to consider when planning your retirement is determining the income level. Are you going to need more or less money than you are making now?  Be sure to plan accordingly for all the things you want to do in your retirement.  Are you going to travel more, take up a new hobby, or something else?  Remember, you will have a lot more time on your hands, so plan accordingly.

The next thing to consider when planning out how much money you will need is inflation.  According to inflationdata.com, the long term average annual inflation rate is 3%.  So if you have 20 years until retirement, you will need approximately 60% more income (ignoring compound interest).

Another thing to consider is how much of a nest egg you will need to generate that income.  Most studies have shown that 4% is the safe withdrawal number.  So in order to figure out the amount you will need, divide the income you want by that 4%.  For example, if you needed $100k in income each year.  $100,000 / .04 = $2,500,000.  I realize, this is a big number, and your number may be even bigger, but don’t be discouraged.  Time is on your side, but you will need to make some changes and the sooner the better.  Something is always better than nothing!

Remember, retirement doesn’t have to be an unobtainable dream.  Call my office today for help creating a plan to get you on the right track.