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Do You Have Enough Saved to Retire?

Do You Have Enough to Retire?

One of the most frequently asked questions I receive from my clients  is when they can retire.  There is no simple answer, since it depends upon how much is required to sustain your desired lifestyle in retirement.  

I often suggest that clients try to save 10% of their income annually once they start working.  I usually suggest contributing the maximum to their 401K account, and saving additional amounts as they are able.  Once clients are approaching retirement, I think it is important to look at what they envision for their life ahead.

Many people have heard of the 4% rule.  This assumes that you can safely withdrawal 4% of your portfolio each year in retirement.  For example, if you have a portfolio of $1,000,000 at retirement,  you would safely be able to withdrawal $40,000.  Flipping the 4% rule can help you determine your so called "magic number" of how big your portfolio needs to be. This involves dividing your expected annual spending by .04 (or multiplying it by 25) to obtain your target.  Let's say you estimate that you would spend $100,000 each year in retirement.  That would translate to a required portfolio of $2,500,000.  

There are also many other factors that need to be considered such as your health, your expected longevity, and any personal goals that you would like to fund out of your portfolio.   For example, if you have three children, and expect to pay for each wedding at $40,000 each, this should be included in the calculation.  Similarly, if you expect to travel more in retirement, or expect to purchase a vacation home, these expenses need to be considered when determining the size of your portfolio at retirement.

Since everyone's situation is unique, it is important to consult with a financial adviser to make sure that you can afford the lifestyle you envision for your retirement.  It is important to also consider alternative social security strategies and any pensions that may be received after retirement. They have sophisticated modeling tools that can be used to calculate the required savings and appropriate portfolio allocation help you to achieve your retirement goal. 

I would love to help you achieve the retirement that you have always dreamed of.  Please contact me to discuss your unique situation.  I am available to meet with you via telephone, in person or virtually using  Zoom video conferencing.  I look forward to hearing from you soon!