How Much Do I Need to Retire?

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It’s possible that you are not yet thinking about retirement and that’s ok. As a young adult, you may be more pre-occupied with building your career and generating income to pay for your next meal. But retirement planning is best done well in advance. Particularly because the sooner you start, the less it hurts your current budget. There are a few things to consider when you are planning your retirement; your retirement date, your desired cash flow at retirement and how long you plan to live on your retirement income. Once you have these three pieces of information, you can start the planning stage.


When Will I Retire?

Let’s be realistic. It’s very popular right now to decide to Retire by 40. But unless you are starting extremely early, making large financial sacrifices, or generating a ton of current income, you should choose a date that gives you time to save. This retirement age can change, but in general 65 is a typical retirement age. Do I plan to work for money until I am 65? Heck no! I plan to have enough cash flow generating investments that I can choose if I want to work for the fun of it or just live on my investments. So my retirement age is lower than 65. Personally, I’d like to retire from working for money by next year but realistically, I’m giving myself 10 years to reach my passive income goals. Does that mean I plan to quit my job in 10 years? Highly unlikely, but it will be nice to be confident that if I were to lose my job, I would be ok financially. So when you are choosing an age, consider these factors.

How Much Money Do I Need to Retire?

The next thing you need to consider is your desired cash flow at retirement. Do you want to receive a check of $1800 per month? $3600 per month or $10,000 per month? It’s all about how you plan to live during retirement and what expenses you expect to have. Do you plan to own your home? If so, that eliminates the need for a mortgage payment. Do you plan to spend your days traveling? If so, you may need more cash each month to pay for your trips. I’ve heard that 80% of your ending salary is a good starting point. I could probably survive on 100% of my starting salary at retirement. Take a moment to imagine what you want your retirement to look like and that should help you back in to an appropriate number.

How Long Will I Live on My Retirement Income?

This is an interesting question and one that I hadn’t considered when I first started planning for retirement. I assumed that I would have cash flow producing investments and I would live on the monthly cash flow. For example, if I had a dividend portfolio that paid dividends of $3,000 per month I would just live on that. There would be no need to consider my ending retirement date because the investments would continue to generate cash through my dying day at which point it would be passed on to my lovely grandkids. :) But thinking about how many years you plan to be retired is a step that many people miss and there fore do not save enough to make it through even 10 years of retirement. That means if you plan to retire at age 65, you’ll end up back at work at age 75. You should first assume that you will have income through your dying day. So now you have to try to figure out when you will die. Most people bet on 85 but I like to shoot for the moon and assume 120. But just to be safe, let’s say 100 years old. With 65 as a retirement age, you will need 35 years of income.

Now What?

Check out this handy Retirement Calculator over at to play around with a few numbers to see how much you have to save each year to reach 1 million by retirement.

How did you come up with your retirement numbers? Planning to retire by 40? 55? 80?

LaTisha Styles is a motivational speaker, millennial money expert, and spokesperson specializing in simple finance for millennials. LaTisha is the producer and host of Young Finances TV, a weekly series featuring funny, insightful videos on the basics of personal finance. LaTisha has been quoted in Forbes and Mainstreet, featured in The Economist, and mentioned in US News as a top personal finance expert to follow on Twitter. You can follow LaTisha on Twitter for daily millennial money tips to budget, invest and achieve success!

  • krantcents

    I expect to have no mortgage or any other debt when I retire. I decided I wanted $5-6K per month guaranteed. I will have that through Social Security and a pension. My IRA etc will support all my wants because my needs are covered.

    • LaTisha Styles

      Nice! Debt free retirement is definitely the way to go. Lucky you with the pension!

  • Michelle

    We want to “retire” early, but we would still like to have some sort of income coming in and working with something that we love.

    • LaTisha Styles

      Yeah I think the meaning of retirement has certainly changed in the last few years. Previously it meant leaving the workforce to play golf all day and now it means leaving the workforce to work on a passion project instead.

  • Greg

    I think about $4 – 5K will do for me. Although, I plan to retire well before 65, so I am saving pretty aggressively in the meantime.

    • LaTisha Styles

      4-5k sounds like a pretty reasonable number. I think I could survive on that in retirement also.

    • LaTisha Styles

      4-5k sounds like a pretty reasonable number. I think I could survive on that in retirement also.

  • Steven J Fromm & Associates

    Based on expected life expectancies and the amount of money involved retiring early will be quite difficult for most young people today. The numbers simply do not work for early retirement.

    • LaTisha Styles

      I’d agree, especially with the recent downturn in the economy. But there are always unconventional ways to retire early.