# How to calculate how much money you need when you retire

How do you calculate how much you really need to retire? The simple part is to get to a theoretical number to start with, which involves many assumptions and estimates. The complex part is how to estimate or assume in real life, which can deceive us into thinking that things are always good or bad, even if we do not know what is going to happen.

However, if you can ignore “inscrutable”, you can reach a very reasonable retirement figure.

The useful life of retirement Start by estimating how many years you can live after your retirement. Check out the average life expectancy of people of your age and gender, and consider the age at which your grandparents or parents died to find out about your lifespan. Consider the age at which you expect to retire. For example, if you want to retire at 65, you think that you can live to be 85 years old, then you want to live for about 20 years after retirement.

You can live to be 85 years old, or you can not survive, but at least you have a goal now.

Retirement Salaries The next thing you want to estimate is how much your income today is something you need to live on. When you retire, you can reduce spending (complete parenting, reduce the size of your home or give up debt, including mortgages), live a more frugal life than it is now, or you may want to live the same standard of living that you now.

At the very least, you should plan to need 80% of your current income, but a better golden rule is 85%. Let’s say Jamie now makes \$ 50,000 a year. After establishing the budget, he decided he could live on \$ 40,000, so he set his retirement goal at 80% of his current income. She plans to retire at the age of 70, and according to her family history, she thinks she can live to be around the age of 90. The simplest calculation is \$ 40,000 x 20 = \$ 800,000.

However, this is a complex exercise. What you really want is a sum of money that will generate an annual interest, and that is the money you depend on for your survival. In this case, 800,000 dollars can effectively be effective. If you have \$ 800,000 in investment, you can get 5% interest per year, and your portfolio can pay \$ 40,000 a year without having to pay the Director. Of course, market returns are variable, so if you assume a lower annual rate of return, such as 3%, you need almost \$ 1.4 million per year to generate \$ 40,000 in profits.

Since inflation, taxes or years of poor market performance can affect your assumptions. Another factor that affects your hypothesis is social security. If you get social security, this will help you pay a monthly fee. If Jamie needs \$ 3,300 per month for living expenses and social security pays \$ 1,500 per month, his share will be reduced to \$ 1,800,000,000,000,000. Of course, social security itself is a complex system.

If you are an optimist, you can use that number as your hypothesis, or scale down depending on the level of expectations you have for social security.

Complexity can undermine assumptions Jamie may also want to pursue a higher goal. This is not only because she suspects that she can get a social security check, or because she thinks that taxes and inflation can only go up, but also because she wants to plan for the unexpected expense that could erode her retirement budget. Health care and health problems are a clear example: a life-threatening disease can quickly drain some of your savings and interests.

She can deposit a sum of money each month for long-term care insurance, which helps pay for the care of homes and facilities, but there will be fees that are not covered by the insurance. Volatile stock markets, extremely high income taxes or capital gains, and rampant inflation are other risks to your retirement income. But on the positive side, keep in mind that retirees do not take all their savings at once.

Your money should continue to work for you, earning interest and dividends, even if you start distributing. You can use retirement calculators, such as Ballpark E \$ timator from the Employee Benefit Research Institute, or Merrill Lynch’s easy-to-use interactive retirement calculator, See what you can do. You can find more information about other retirement calculators.

With these types of retirement calculators, you can change your assumptions to change the result, but if you really want to make sure that your estimate of how much money