How Much Is Enough For Retirement?

Many people who are saving for retirement tend to think of their ability to retire as being dependant upon hitting a certain savings total. This leads to the inevitable question of, "How much money do I need to retire?", "When will I have enough money to retire?" or simply "What's the number?" While the answer isn't quite that simple, the calculator in Boulevard R can help guide you toward what you want to know. The first step toward figuring out how much money you need to have saved to retire is to give some thought to several important assumptions.

How long will I live? - There are a number of ways to estimate your lifespan, however when it comes to planning for retirement you should not use the simple life expectancy of your age group. By definition your average life expectancy is an average so if you use that assumption and plan to only have enough savings until then, you're basically looking at a 50% probably you'll live longer than your money. Unless you have a family history that suggests a short lifespan, you should probably assume a personal life expectancy of 90-95 years.

What kind of investment returns will I see? - Long run returns for US stocks have historically been in the 10-11% range and returns on bonds are around 4-6%. Decide what mix of bonds and stocks you're comfortable with and Boulevard R will help you calculate a return assumption based on historical returns.

What should I use as an inflation assumption? - The concept of inflation is important. Consider that 20 years ago you could buy a good but not fancy new car for less than $10,000. Today that same car probably costs more than $20,000. It's a safe bet that most everything will be more expensive when you retire so if you are going to have enough money saved for retirement you'll have to factor in inflation. We can't predict the future but based on past history Boulevard R will make an intelligent estimate for you.

How much will I need to save every year for retirement? - For most people this is not a question of how much you need to save but rather how much can you save. It's pretty obvious that the more you save for retirement the sooner and/or better your retirement will be. Use a realistic number and be sure to allow for increases in your savings to go along with the higher pay you'll likely receive as you progress through your career.

How much will I spend every year in retirement? - There is no simple answer here but with Boulevard R you can make an educated guess. For years some planners used a standard 80% of pre-retirement income as a starting point but in reality most people spend more when they first retire than they did when they were working. Why? Because new retirees usually have a long list of things they want to do and now that they are retired they suddenly have the time to do it. Where you choose to live in retirement and the cost of your activities also play a very big factor. Boulevard R will help you look at your future goals and make an estimate of whether you'll have enough retirement savings to afford them.

When do I want to retire? - This may seem like it's dependant upon when you'll have enough money to retire but in fact your input here makes a difference. Let's say you expect to live to age 90. If you retire at 60 you'll need to have saved enough money to last for 30 years, but if you retire at 70 you'll only need enough money to last 20 years. Delaying retirement, even if only for a few years, can have a profound effect on whether or not you have saved enough to live on. Having enough to retire at 65 may not be enough to retire at 60, or you may be able to retire at 60 but not with the lifestyle you'd have if you waited. Be realistic and use Boulevard R to experiment and to see what plans seem reasonable.

Everyone wants to know their "number." The problem is that figuring out if you have enough money for retirement is not only highly individual, but it's also a moving target and a specific number really doesn't tell you enough. Some software will try to convince you that you can calculate how much is enough for retirement down to the last penny. We run complex models that simulate market conditions, but we can't predict the future so even our results can only be educated guesses. To be effective in planning for your retirement you really need to track your progress on an ongoing basis. We figure if we can give you the process, provide you with some valuable ideas on how to get there and keep you motivated then we've done something much more valuable than answering "How much is enough?" We've helped put you on track for a secure and meaningful retirement.