How Much Money Do I Need to Retire? (A Quick Guide)

By Mary Grace

How much money do I need to retire early; I asked this question many times to myself. Is million dollar enough for me to retire happy, rich and comfortable? In retirement planning, you need to know how much money do you need to retire? Retirement planning will become so easy if you are willing to learn everything about it. Retirement planning is exciting and interesting. Today, let us find out how much is enough for retirement. Let us analyze the amount of money you need to retire. The question is when do you want to retire? At age 60, want to retire at 65, 50 or 55 or 45? You should know when do you want to stop working and start relaxing. The amount of money you need to retire is also based on your retirement age. You don’t need to use retirement calculator just to know the exact amount of money you need for retirement.

Many people are ensuring their social security. They rely on social security. They are planning to retire with a lot of money in their pocket, in their bank account and other people are expecting good retirement benefits from the benefits or from the employer. However, they are not aware about “passive income” during retirement. We will discuss the passive income for retirement in our next guide.

Let me first share to you the answers of other financial experts;

You need enough to meet your annual expenses. If you make $50,000, you would need $1,250,000 with a post retirement life expectancy of 30 years. – Levar Haffoney

The prospective retiree must know his/her monthly income & out go…he must take the last few years of all expenses and average them out over the month…more easier to figure are the income streams (annuity, 401k, dividends, rents, interest, etc)…ex: I see $6-7k/mo out go w/about $9k+/mo income so I’m ready… – Sam Smith

I find the desired monthly income in retirement by taking historical spending and adding a bit. I run a Monte Carlo analysis based upon the real returns and generally prefer a safety number of greater than 90% – Adam Runk

How Much Money Do I Need to Retire?

Let’s just answer first the most asked questions in retirement planning; how much do I need to retire. Do you want to retire poor or rich? Do you want to retire comfortable or want to retire struggling financially? Do you want to have a high standard of living during retirement?

money do I need to retire

Image Credit: Creative Commons by Newton Free Library – Consumer Reports Online

The word is “standard of living”. What is your standard of living? This question is also related to the questions “what kind of lifestyle do you want when you retire?”, “where do you want to live during retirement”?

You better think of the word “standard of living”. I will give you an idea. Let’s just change the word “standard of living” to a “retirement lifestyle dream”. Here’s what I want to do during retirement;

  • I want to retire at 55
  • During my retirement, I should have enough money to cover my lifestyle expenses such as medical, utilities, entertainment, travel and pleasures.
  • I want to travel different countries each year.
  • I just want to play golf and spending my time with my grand children.

In order for me to achieve that goal, I must have a retirement plan. In retirement plan, I wrote the following;

  • Year of retirement
  • Number of years to prepare my retirement
  • Exact amount of money to have in my savings account
  • Exact retirement target earning asset

Retirement Target Earning Asset

The last part is the most important. The retirement target earning asset. The idea is I should earn money passively. On my retirement, all I want to do is to enjoy. That’s why, while I am still young I should acquire my retirement target earning asset.

Retirement target earning asset is the investment funds where in that funds will earn profits and the profits will use while you are living. Example, I have a lifestyle worth $1,000 per month. My annual expenses is $12,000. Therefore, if I have $1,200,000 target earning asset that earns 10% per year, I can still make $12,000 per year without any effort on my part.

So, beginning today. You should start investing money until you acquire your retirement target earning asset. The earlier you acquired your target earning asset, the earlier you can retire. So, the answer to the question “how much money do I need to retire” is depending on how much target earning earning asset you really need. In my next article, I will guide you on how to calculate your retirement target earning asset. Do not forget to subscribe in Retirement Planning IQ to get the latest updates. Share this post with your friends!

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