Finance Friday #3 - How much $ do I need to retire?

Jan 31

Scroll down to #1 for the Retirement Savings Calculator

Several weeks ago before I began this series, I reached out to my clients, friends and social media viewers with the questions: “What finance topics interest you? Where do you feel like your know-how is lacking?” My husband and I are pretty financially savvy and are committed to the FIRE (Financial Independence, Retire Early) lifestyle and we love to educate others on how to be financially prepared. One of the most popular responses I received to that post was, “How much money do I need to retire?”

Today’s episode covers this!

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View the entire video on my IGTV! Have you ever wondered what you need to be setting aside each month in order to retire one day? Today we'll delve into how to go about figuring that out, as well as touch on a couple of ways you can begin saving for retirement if you haven't already. View the corresponding blog post here: https://www.arielstarke.com/news/finance-friday-3-how-much-do-i-need-to-retire #financefriday #arielstarkerealtor #retirement #hustle #motherhustler #workhardplayhard #personalfinance #budgeting #investing

A post shared by Ariel Starke, REALTOR® (@arielstarke) on Jan 31, 2020 at 5:14pm PST

Calculate the total you need to save yearly (based on your current salary) in order to retire. There are many factors that go into play, so it’s simplest just to use a retirement calculator. I prefer this one.
Once your yearly amount is revealed, divide that by 12 to determine how much you need to save per month toward retirement! (Hint: You’ll want your post-retirement income to be around 80% of your current income to live a comparable lifestyle, assuming your home is paid off at that point).
What about Social Security?
I hate to be frank, but honestly, Social Security income is no longer promised to us. Here’s the latest update from the Social Security Administration on the exhaustion of SS funds. I believe my video says 2036, which several other sources previously said; the site linked here says 2037. For those of us retiring after 2037 (only 17 years from now), we are likely to only receive only 70-odd% of what we previously expected to get from Social Security. No one should be counting on this income alone.
Debt & Other Considerations:
If your house is not paid off, you’ll want to be sure that you’re prepared to pay the mortgage from your retirement income since you’ll no longer have a regular salary coming in. The average home loan right now is 30 years. If you are not buying a home until your 40’s but plan to retire at 65, be sure you’re adding in extra funds to cover the payments after you retire.
You’ll also want to ensure that you’re counting on having a little extra for medical emergencies, home renovation, travel, and anything else that may be a possibility in your future.
How to get there:
1. 401k - We will talk about this more next week, but here’s a quick and dirty run down - A 401k is a retirement account set up by your employer. You contribute your savings money before taxes are taken out. Often, your employer might match how much you are contributing. There are limits to how much you can contribute each year. More on this next week.
2. IRA - This is an individual retirement account that is not set up through your employer. You’d do this on your own and it’s best for those who are self-employed, independent contractors, or whose employers do not offer a 401k benefit package. Contributions to this account are made after taxes are taken out of your income.
If you’re just getting started on saving for retirement, calculate how much you should be saving and get going! This may require some sacrifice and maybe a lifestyle rearrangement, but your older self will thank you!