How much money do you need to retire comfortably? Is it $250,000? $500,000? $1 million or more? What is a realistic amount based on your current and visualized lifestyle?
Most people feel they need more money than what they have. Ask a person with $500,000 in retirement savings how much they need for retirement and nine times out of ten they will say, “More than what I currently have.” Ask a person with $1 million or $3 million in retirement savings and the answer will be the same.
The monetary trick to a happy retirement is not to concentrate on amassing an abnormal amount of wealth, but to determine how much money will make you feel secure. In other words, how much money do you need to enable you to live and fulfill your visualized retirement lifestyle?
In a practical sense, how you spend your retirement time determines how much money you will need. If you plan to travel the world or indulge in expensive hobbies such as luxury sailing, then your financial needs will be much greater than someone with more modest plans. What you don’t want is to envision a retirement you realistically cannot afford. All this does is cause anxiety and unease.
By creating a retirement that is realistic and affordable, you gain satisfaction and peace of mind. Financially estimating your retirement plans is the key to determining the amount of money required.
Ask yourself the following questions:
- At what age do my partner and I want to retire?
- Are we planning to downsize our home?
- Are we planning to travel abroad? How often and how far?
- Do we plan any major purchases or renovations?
- Will we be moving to a less expensive home?
- Will I be working part-time while retired?
- Will I be helping to support any family members?
- What hobbies will my partner and I pursue and what are the costs?
- Do we plan to frequently dine out, attend the theatre, movies?
- Do we plan to spend all our capital during our lifetime or are we planning to leave an estate?
By answering the questions above, you should start to get a sense of how much money you will need in retirement. Obviously, there is no single amount that will guarantee an adequate retirement.
Most financial advisors in North America use a guideline of 70 to 80% of current earnings to determine the amount you will need to maintain your standard of living in retirement. This is assuming that you are living mortgage or rent-free and that you will be able to live somewhat more inexpensively at this time.
Rick Atkinson