How Much Money Do I Need to Retire?

People have a habit of thinking wistfully about the time that Social Security and pensions could help them easily retire without worry. They could just spend their golden years in comfort without straining to make it happen their whole lives. There should be no real nostalgia to do with those times though; things were that good for just a few decades out of the hundreds of years that we have spent fending for ourselves in our old age and retirement planning was never a thought. Come to think of it, around 1985, when all the traditional pension plans were going full swing, only about half of all private employees ever received coverage. Today, only about 15% of all employees who work for private companies can hope for a proper pension check in retirement. But that apart, if you aren’t part of the lucky 15%, you’re probably asking yourself, “How much money do I need to retire?”

How much you need to sock away to retire in comfort depends completely on how old you are, how much you make, and what your expectations are, of course. But as a general rule of thumb, today, experts seem to be in agreement that putting 20% of your income by for your golden years seems to be a completely workable figure. With something like that saved each month, by the time you retire at 65, your investments should be able to bring in about 80% of what you used to make when you worked.

“How much money do I need to retire?”, was what I asked of myself the day I started working at 22. It seems to me that 15% out of my paycheck each month was an impossible sum to set aside. Around the time I was 27, I was making $50,000 a year. I contributed to my 401(k) plan, and the company matched half of every dollar I contributed, up to 5% of my salary. I set aside $3000 every year to put into my 401(k) and $1500 from the company’s matching contributions. My 401(k) is calculated on pretax money. That $2500 a year or so. It really wasn’t money that I missed. The best part was, doing this could get half the job for me, saving for my retirement. For the rest of my plans, I decided to contribute an additional $2500 to my Roth IRA. Withdrawals from a Roth are tax-free. I would actually like to contribute as much as I’m allowed – as much as $4000 a year.

So again, “How much money do I need to retire?” I’d put it at about $2 million. I’ll certainly need to save about twice as much as what I am now to reach my target. I hope to learn better financial habits, to use my credit card less, to cut unnecessary costs. It can be simple with careful planning. And in the end, I don’t ever want to completely retire. I see lots of people working into their 70s, but with such hard times on the horizon, perhaps we should consider the new rules to when doing our retirement planning.

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