FITNESS INSPIRATION – EVAN M
Retirement is supposed to be the reward after decades of hard work. But will you actually have enough money to retire comfortably? This question plagues many approaching their golden years. While rules of thumb exist, determining your personal magic retirement savings number requires a detailed analysis of your specific situation and desired lifestyle.
The oft-cited guideline says you should retire with about 10 times your final annual salary in savings. So if you earn $100,000 in your last year of work, you’d want $1,000,000 socked away. This is a reasonable benchmark, but may not apply to everyone.
Those with higher incomes generally require relatively larger nest eggs to maintain their standard of living. Someone used to an expensive lifestyle needs more savings than a penny pincher. Geographic differences in cost of living also impact how far retirement savings will stretch.
The 4% rule is another popular retirement savings guideline. The premise is to multiply your annual retirement spending goal by 25. So $50,000 per year in retirement expenses would mean needing $1,250,000 in the bank. Since conventional wisdom says you can withdraw 4% of savings each year in retirement, $1.25 million would provide $50,000 annual income.
But this approach also has flaws. Ultra-low interest rates make the 4% withdrawal rule harder to implement. And basing the number only on current spending fails to account for changes in your lifestyle, health, and expenses as you age in retirement.
The best way to determine your personal magic number is to make a detailed retirement budget, factoring in all sources of retirement income like Social Security and pensions. Build in a cushion for unexpected medical costs and be realistic about your life expectancy and projected rate of return on savings.
Don’t neglect to account for your desired retirement activities and travel plans. This will give you a more accurate picture of how much you need to save before you can comfortably quit working.
Retirement planning is not one-size-fits-all. While rules of thumb provide a starting point, taking a personalized approach based on your unique goals and circumstances is key to making sure you have enough for the retirement you really want.
FITNESS INSPIRATION OF THE DAY – EVAN MACDONALD
