How Much Do You Need to Retire?
Retirement can be stressful for many people around the world. Identifying your retirement needs is the most crucial step in retirement planning. Many people would like an exact dollar amount, but it is impossible to give the same amount because everyone’s situation is different as there are many factors. Here Jordan Sudberg discusses how much one needs to retire.
1. Percentage Of Your Salary
The first thing one should do is calculate how much one will need to live on each year after retirement. This will help determine how much of your salary is needed for retirement. Sudberg recommends one look at their current wage and determines the percentage of it that one spends on necessities. Since most people usually spend a significant amount on things like food and clothing, they will have a meager percentage of their salary saved for retirement. He recommends getting an average of their salary and then growing that percentage by 4% every year. This is a conservative estimate, but it will give one a rough idea of what is needed for retirement.
2. Investment Return Expectation Rate
Another important factor in determining how much one needs to retire comfortably is the rate of return that will be earned during retirement. Sudberg recommends estimating the return rate that will be earned in their investments. He suggests using a 7% figure for companies like stocks, bonds, and real estate. He says this is only a guideline, but most people should get it if they want to retire comfortably. This is because the feelings of value will vary depending on each person, and it is important to set one’s expectations accordingly. So as not to be surprised in the future, one should make this a significant factor in planning for retirement. It is also important to set a figure that one can live with in case investments don’t perform as well as expected.
3. Other Financial Goals
Sudberg says that people should work out all other financial goals so that they don’t spend their money in different ways when they are retired and have no income coming in. Another essential thing he suggests is paying off any mortgage on your home. This will help reduce the amount of money one spends on themselves each month. He says one should also ensure that they will have enough money to pay for their medical expenses and other miscellaneous costs after retirement. This will help them plan to save their initial retirement funds on these things. Having other financial goals makes it easier to plan out one’s money and figure out how much one needs to retire.
Jordan Sudberg says that there are many factors that one can take into consideration when determining how much one needs to produce for a comfortable retirement. One can retire comfortably with a proper plan and understanding of all the factors. Your retirement plan will differ from your neighbor’s due to many variables. Your age, profession, and financial goals are just a few factors.