Here's another item on Money magazine's list of 25 rules to grow rich by. Today's tip gives some thoughts on how much you'll need to save for retirement:
Aim to build a retirement nest egg that is 25 times the annual investment income you need.
So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million. This rule is based on the amount that you can safely withdraw from your nest egg in retirement.
This is one of the methods I used when I set my retirement number (I called it the 4% method since you can withdraw 4% out per year.) It's a good rule of thumb to use, though I preferred developing my own spreadsheet to estimate how much I needed for retirement. (Or even the guidelines detailed in How Much to Withdraw in Retirement.)
Want to see how you're doing? One way to see if you're on the right path to saving enough for retirement is to determine your R-score.
For more thoughts on making the most of your retirement, see these posts:
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