How Much Money Do You Really Need To Retire?

"Don't simply retire from something; have something to retire to."
- Harry Emerson Fosdick

The picture are all the same. You and your spouse are older with white hair and a big smile. You are at a beach wearing white walking around with no problems. I'm not quite sure why you would be wearing white. Do people all of a sudden decide to wear white after they retire? Maybe that will be my next research project.

The pictures look really nice. All institutions that sell you 401ks or IRAs have a picture of this sort in the brochure or folder they give you. The crazy thing is that when we think of retirement, that's pretty much the first picture that comes to mind. However, there's a lot to consider when thinking about retirement. Most people automatically get a 401k from their job because they offer it, but there is no set plan or idea about what retirement really means. The most important element about retirement is knowing how much money you actually need to retire comfortably. 

According to US News Week, the federal government estimates that 12% of women and 7% of men over the age of 65 live in poverty. Why would this be? How could this happen? The research didn't necessarily say why, but according to the Transamerica Center for Retirement Studies, only 1 in 10 people have calculated how much money they need in the bank to comfortably retire. I want us to be that 10% so let's start making some calculations. 

Financial advisers recommend that after retirement you should be able to replace 80% of your income. This means during the year that you retire, if you make $65,000 annually, let's say when you're 65, then you will need  $52,000 a year for the rest of your years. This means that you will need some money coming from somewhere that equates to $52,000 a year or $4,333 a month. If you want enough money to last you for 20 years of retirement, then multiply that by 20 and you'll need roughly about $1 million dollars. I haven't even accounted for inflation which is about 3% a year. For those that might get a bit confused with my math, I found a great retirement calculator from CNN money. 

My goal is not to scare you at all. My goal is to have you face reality if you haven't yet made these calculations. My goal is also not to make you believe that it is impossible to retire with $1MM. The way I think about it is simple. I am currently 30 and have 35 years to figure out how to generate enough consistent cash flow to last me through retirement. It all starts now. We need to plan the seed now rather than later. We need to have our money working for us now if we really want to enjoy our later years without any financial worries. Whatever dreams ans aspirations you might have for retirement, I believe you can achieve them. The question is: do you believe you can achieve them?

Although I am definitely thinking and researching about retirement plans and options (which I will discuss in my next blogs), I would personally want to be on the beach with my loved one (with our black hair) living comfortably now. That's why I stress the importance of money management, cash flow, investments, budgeting and discipline. I personally love to work. The question I ask myself is more: what would I like to do for work when I'm 65? My goal is not to have to work for a paycheck, and that can start now. 

This way, my love and I can wear our white clothes now instead of later. Any thoughts? Share. 

Don't forget to share this blog so you can encourage others: family, co-workers, friends. Give them something to get motivated! You never know what they might be going through. A few words of encouragement can go a long way.