Can I afford to retire?
Why ask someone else, even an expert? One thing is for sure, if you have to ask that question at all, you are probably a tad behind in your retirement planning – or you need to do more detailed planning.
Then there is the other question …
How much money do I need to retire?
Only you know the answer to that question as well. I admit it’s a bit more tricky than “can I afford to retire?” But the answer is you need sufficient assets to generate annual income in retirement for rest of your life that support your lifestyle.
Two factors only you can determine:
How much do you want to spend in retirement, including money for fun stuff, like travel? And second, after Social Security and possibly a pension or an annuity, what is the gap between that income and what you want to spend?
That gap is what you need assets to fill. The place to start is to use the 4% guideline for withdrawals. In other words, if the income gap is $20,000, you need an investment pool of about $500,000.
Not everyone needs a million dollars as is often mentioned.