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.