How much do I need to retire?
If you ask me, I’d say I have no idea what you need and neither does anyone else. $1,000,000 is often thrown around as the goal, but that means you will live in retirement on roughly $40,000 a year (plus SS). Is that good enough for you? Maybe, maybe not.
Conventional wisdom in retirement planning tends to focus on building a nest egg from which you will draw during retirement. That’s a big part of the goal, you certainly need a pile of money to take you through retirement, but what you also need and the way to think about retirement income planning is an income stream.
For those relatively few of us who have a pension and Social Security knowing money will show up in the bank every month no matter what the stock market does makes for less financial stress. For the great majority of Americans replicating that type of income stream should be the primary goal.
That means several different sources of retirement income that are as guaranteed as possible.
When we think of saving for retirement, we tend to think 401k) or IRA. Those are tax-favored plans, and you may receive an employer match which is important, but they should not be your only source of retirement income. On the road to retirement you need to consider other investments as well. That includes interest and dividends, perhaps an annuity.
Let’s be clear, all this is relevant to your income, you do not have to be rich to own stocks or bonds. What you are trying to do is assure a retirement income consistent with your lifestyle before retirement be that an income of $40,000 a year or $400,000.