Calculate Your Retirement Number -- And You'll be Happier You Did
Here's an interesting stat from the folks at Money Central -- people who calculate a specific retirement savings number are actually happier in retirement. The details:
Studies indicate that people who have set retirement goals and saved for their retirements say life in retirement is actually better than they had expected.
The piece then goes on to give five steps to arrive at your retirement number.
Almost a year ago, I set my retirement number. I calculated it by using various methods and then selected a number within the ranges I came up with. All I can say about it are:
1. WOW! It's a BIG number!!!
2. I like having a specific goal to shoot for.
3. I think I'll feel better in retirement as a result. ;-)
It seems like setting a number might be kind of pointless as your number will constantly be changing due to inflation. For instance, right now my number could be $1.2 million, but given the effects of inflation, I might need a lot more in 20 years or so.
Posted by: Alex | June 26, 2007 at 02:46 PM
@ Alex - It's not too difficult to adjust your number for inflation. If you google "future value formula" or if you know how to solve for FV on a financial calculator, you can do it.
The FV of $1.2mm in 20 years at an inflation rate of 3% is $2.2mm.
This is not, of course, to say that figuring out what the number should be to begin with is easy - it's not!
I have a target, but I am constantly revising that target as new info roles in. Making assumptions about how much I will need to withdraw annually, and how long the money will last is hard. Even the experts have big disagreements on how to go about estimating. I have a fin'l planner to help me and even her numbers are suspect, because I think it's to her advantage to be very conservative. Of course, she always rebuffs me by saying, she'd rather save too much than too little - That will usually shut me up.
Posted by: Miguel | June 26, 2007 at 03:01 PM
Wow. And I thought I had a big number at 20X my salary. I think you're at 25X, based on what I read in your posts.
Posted by: Super Saver | June 27, 2007 at 08:10 PM