EXTRA CREDIT: Retirement Rule Of Thumb
Here is a rough rule of thumb for how much you will need. For every $10,000 in income per year you will need in retirement, you may need $250,000 in investment savings.
That amount takes into consideration future inflation and spends none of your $250,000.
Here is the way that thinking goes.
It assumes you will make 8% on average on your investments. It assumes inflation will average 4% of that – so you won’t spend that – it helps you keep even with inflation.
And it assumes you will use the other 4% of investment income to live on. So 4% of $250,000 is $10,000 a year to live on.
Note that this is just a rough guide. Also note you spend none of your $250,000 in this example. Most people will begin to draw this down as they get later into retirement.
Also note that I STRONGLY ADVISE that you see a qualified retirement counselor or financial consultant to plan all of this out for your specific situation and assets. This book cannot address your unique, overall financial situation.