If you haven't already read the first post of these series, I suggest you go back and do so to get the background of what we are trying to show. For this particular post, we just want to know how much is needed to live for the 20 years between the ages of 65 and 85 if you were making $60,000 a year prior to retirement. Again, read the last post, to see where the numbers came from.
Speaking of numbers, it is important to note that individual goals and resources ultimately dictate how one will fare in retirement. The numbers presented here are general and are only used to make a point.
To begin figuring out how much is needed for 20 years of retirement, we have to first establish how much income is needed during retirement years. After taking into account certain changes like healthcare costs and taxes, a recent study by the Employee Benefit Research Institute (EBRI) found that even after 5 or 6 years in retirement, 46.9% of households spend at more than 80% of their preretirement levels with 23.4% spending more than 120%.
Don't ask me how.
For the sake of simplicity, let's say retirement spending is at 80% of preretirement income. This means that for every year in retirement, you'll need 80% of $60,000. This amounts to $48,000.
We'll stick to round numbers again and say $50,000.
Quick math. $50,000 a year for 20 years equals ONE MILLION DOLLARS!!!
As if you didn't already know you need to be a millionaire to retire without extra work.
But wait. You forgot there's something called inflation.
We'll explore this demon of inflation in the next post, but even before diving into it, do you remember the question from part 1?
Will $100,000 saved at 65 be enough?
I believe you can now answer that yourself.
Just don't forget that our results are based on a preretirement income of $60,000 and spending $50,000 during retirement. If you make less, spend less, or ignore this beast called inflation, you may not need to be a millionaire. And if you spend more, let's just say you have a lot of saving to do.
After discussing inflation, we'll tackle the question: can I even save a million with a 60K annual income?
Speaking of numbers, it is important to note that individual goals and resources ultimately dictate how one will fare in retirement. The numbers presented here are general and are only used to make a point.
To begin figuring out how much is needed for 20 years of retirement, we have to first establish how much income is needed during retirement years. After taking into account certain changes like healthcare costs and taxes, a recent study by the Employee Benefit Research Institute (EBRI) found that even after 5 or 6 years in retirement, 46.9% of households spend at more than 80% of their preretirement levels with 23.4% spending more than 120%.
Don't ask me how.
For the sake of simplicity, let's say retirement spending is at 80% of preretirement income. This means that for every year in retirement, you'll need 80% of $60,000. This amounts to $48,000.
We'll stick to round numbers again and say $50,000.
Quick math. $50,000 a year for 20 years equals ONE MILLION DOLLARS!!!
As if you didn't already know you need to be a millionaire to retire without extra work.
But wait. You forgot there's something called inflation.
We'll explore this demon of inflation in the next post, but even before diving into it, do you remember the question from part 1?
Will $100,000 saved at 65 be enough?
I believe you can now answer that yourself.
Just don't forget that our results are based on a preretirement income of $60,000 and spending $50,000 during retirement. If you make less, spend less, or ignore this beast called inflation, you may not need to be a millionaire. And if you spend more, let's just say you have a lot of saving to do.
After discussing inflation, we'll tackle the question: can I even save a million with a 60K annual income?
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