Armchair Millionaire Community Bulletin: How Much Will You Need To Retire?

There is no fast, easy way to know exactly how much you'll need to retire in style. The effort you devote to understanding it now will be invaluable in drafting a retirement plan that will pay real dividends in your golden years.

New York, NY (PRWEB) August 10, 2004 -- According to a study this year by the American Savings Education Council, only 42 percent of surveyed workers had tried to calculate how much money they'd need to save to have a comfortable retirement.

When we asked members of the Armchair Millionaire community about their retirement calculations, we heard many comments from people in your shoes, such as this one:

"My husband and I are in our late twenties and have been saving 15 percent of our paychecks since we started working six years ago. But I have no idea if we are saving enough. Probably not." --Chris

On the other hand, others had meticulously mapped out their retirement savings plan, such as this one:

"Our goal is to 1) retire with at least enough money to replace 75 percent of our income; and 2) to only withdraw 5 percent of our capital every year so we never have to worry about outliving our money or inflation. I calculate that will require at least $2 million in 30 years time, which will very roughly be the equivalent of $4 million 35 years from now after adjusting for inflation." --mdonalds

I believe that financial planners are well worth their fee when it comes to figuring out exactly what you'll need in retirement and helping you create a workable plan for getting there. Even if you get professional advice, however, you should still understand that basic steps.

The Armchair Millionaire's Checklist for Mapping Your Retirement

Figure out the income you'll need. Start by nailing down the annual income you'd like to have in retirement. Some people use a ballpark figure of 70 to 80 percent of pre-retirement income, but I think this can be too low, especially if you have plans to do a lot of traveling or other expensive hobbies. Figure in Social Security (if you think it's a sure bet) as well as any pension payments, and don't forget that you'll need to pay taxes on your retirement income.

Figure out the total amount you'll need. Once you know the annual income you'd like to have, you can figure out the amount you'll need to generate that income. Figure an annual withdrawal rate in the 3 to 5 percent range. If you'd like an income of $60,000, for example, you'd need a nest egg of $1.5 million, assuming an annual withdrawal rate of 4 percent.

Figure out if you're on track. You next need to know if you're saving enough right now to accumulate the nest egg you'll need. The math here can get a bit complex, so your financial planner's calculations will be invaluable. If you're going it alone, I recommend that you run your numbers in at least several of the many available online retirement planners. (You'll find good retirement tools on Quicken.com, Money.com and FinancialEngines.com, to name but a few.)

Benchmark your progress. Once you have a plan in place, check in occasionally to ensure that you're on track and make any adjustments as necessary.

THE BOTTOM LINE: There is no fast, easy way to know exactly how much you'll need to retire in style. The effort you devote to understanding it now will be invaluable in drafting a retirement plan that will pay real dividends in your golden years.

THE ARMCHAIR MILLIONAIRE WEEKLY SURVEY: Has your homeowner's insurance done its job for you? Log on to www.armchairmillionaire.com and let us know.

Lewis Schiff is a contributor to CNNfnMoney.com, the Web sites for CNN and Money Magazine. His newest report, "How to Know When You Are Rich," is now available at www.armchairmillionaire.com.

CONTACT INFORMATION:
Lewis Schiff
Armchair Millionaire
877-833-2823
http://www.armchairmillionaire.com

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