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Larry Ellner
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Larry Ellner   My Press Releases

Do You Know Your Retirement "NUMBER"

Published on 11/15/2014
For additional information  Click Here

When most people wonder how much money they need to retire, they think about the total amount that should be in their portfolio. Is a million dollars enough? Two million? Finance experts are still debating this, so if you’re looking to find a “magic number,” you’re out of luck.

In reality, the real pressing question you should be asking yourself is: “How much income am I on track to enjoy each year during retirement, while minimizing the risk that I’ll outlive my money?”

In other words, it’s not about the total amount in your portfolio; it’s about how much you can spend each year once you’ve retired. To figure out this amount, you’ll need to do some calculations. Ready? Let’s get started.

How Much Do You Spend?

First, you need to know how much you’re currently spending each year. Some finance experts advise saving 70-85% of your pre-retirement income, but that assumes you spend almost everything you earn, which may or may not be true. If you’re currently spending less than you earn, you may wind up saving too much for your retirement—which isn’t necessarily a bad thing, but it does mean you’re setting aside money you could be using now for other goals like building up your children’s college funds or donating to charity.

If you’re currently spending more than you earn, saving 70-85% of your income won’t be enough to ensure a comfortable retirement for yourself—not to mention the fact that you’re probably incurring some debt by living beyond your means, which is another thing you’ll have to deal with in the future. So instead of following the 70-85% rule, focus on how much you actually spend each year, right now. That’s a much better barometer of how much you’ll spend in retirement.

You’ll need to make some adjustments for the fact that your circumstances will change once you’ve retired. For instance, your mortgage might be paid in full and you won’t have commuting costs, but you might want to spend more on traveling or spoiling your grandkids. You may also have added medical expenses and may need to pay people to do the things you once did yourself, like taking care of your home and yard. Factor in these changes to get the most accurate idea of your expenses. Now that you know how much you’ll really need to retire, let’s see whether you’re on track to having that amount…

How to Reach Your Retirement Number

First, you’ll want to calculate your Social Security benefits. Next, add in any extra income you expect to earn, including: · Pensions · Royalties · Rental income · Services you can provide in your retirement, like giving piano lessons or tutoring students in math or English

Now it’s time to look at your portfolio. You’ll want to diversity your portfolio based on your age and risk tolerance, staying in low-fee funds and rebalancing yearly to make sure your investments are meeting your financial goals. Online services like Retirement Rescue Coaching can help walk you through the specifics if you need some guidance. To give you an idea of the portfolio size you’ll need, finance experts recommend withdrawing no more than 4% of your retirement portfolio every year.

With all of the above sources of “retirement income” in mind, how close are you to achieving that number you calculated? Will you have enough saved up, or do you need to make some adjustments? Now that you know what your “magic number” is, this calculation should be much easier.
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