Retirement Nest Egg: How Much Will You Need?
Our team is always quite amazed (and disheartened) to read survey results showing that about two-thirds of pre-retirees don't know how much money they'll need for retirement - arguably the most important stage of their lives. If you are among them, here are some thoughts to get you started.
One rule of thumb is that you will need 80% of your pre-retirement income.
Using a pre-retirement income of $80,000 as an example, that's about $64,000 in annual income. From this, you subtract any expected government and company pensions to estimate the income you will need from your retirement savings.
Another rule of thumb suggests your retirement nest egg needs to be 20 times your target income.
To provide $30,000 in income a year to supplement your pensions, for example, you would need $600,000 in investments.
But while these rules of thumb offer some guidance, they're really not that useful. So much depends on individual circumstances - on your desired retirement lifestyle and dreams. That's why we encourage our clients to take the time to estimate the costs of their own unique plans.
Looking to the future, consider which of your expenses will diminish or disappear, and which will increase. Will your travel costs decrease once you stop commuting, or rise as you take advantage of your free time to explore? Will you pursue an expensive hobby like sailing or golfing, or a money-making one like crafts or wood-working? Will you downsize your home, or perhaps acquire another?
Other factors will also affect the size of the nest egg you need at retirement, including inflation, your tax rate and the rate of return you can expect to earn on your portfolio. This is where our advisors come in.
Your retirement years are too important to leave to chance. Make an appointment with us today to get a more accurate picture of the cost of your retirement dream, and to ensure you have a realistic plan to help you live it.
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