How much do you need to retire?

Before you wax nostalgic for the good old days when you could count on pensions and Social Security to support you in your golden years, remember that those days were relatively brief -- not so much an era as an aberration.

The whole concept of retirement is fairly recent, an experiment that began with the creation of Social Security in 1935, observes Ken Dychtwald, a gerontologist and authority on aging in the U.S.

With the country facing massive unemployment during the Great Depression, Social Security was a way of providing older workers with guaranteed income so that they could leave their jobs, freeing up slots for younger workers.

"No one considered whether a life without work would be satisfying or sustainable," says Dychtwald. Even when traditional pension plans were at their peak in 1985, fewer than half of Americans working for private companies were covered.

As the leading edge of the baby-boom generation turns 60 this year, "it's time to retire retirement," declares Dychtwald, author of The Power Years: A User's Guide to the Rest of Your Life.

And he doesn't think that's necessarily a bad thing: "Like a great dessert, too much leisure can make you sick after a while. Boomers don't want to fade into obscurity. They want to trade success for satisfaction."

 By Kiplinger's Personal Finance Magazine

What is a Good Amount to Retire With?

When you are trying to determine a good amount to retire with, there are many factors that you will have to consider. Assuming that retirement in your case means to stop working completely, below are the factors to consider:

• Your expenses at the time you retire
• Inflation that impacts your expense up to retirement, and inflation during retirement
• Your rate of return on your investments
• The total value of your investments
• How long you live
• Additional sources of incomes

Let’s say $100/day is your expenses ($36500 a year) when you want to retire (so this amount would have already been adjusted for inflation). Let’s say your total value of return producing investments is $200,000 (cannot include equity in your home unless you want to get into a reverse mortgage but that can come with a set of different problems).

To stop working and live on expenses of $36,500 a year on $200,000 definitely, with ever touching your principal (so the $200k never goes down) you will need to achieve a 13.25% annual return on your investment, not adjusted for inflation (18.25% + inflation... maybe 3% = 18.79% the second year) and this number will grow each year with inflation as your principal is not going up). While achieving such a high rate of return is not unthinkable, it is on the high end and quite unlikely (unless you are really good friends with Warren Buffet), when savings accounts are paying roughly 4% and the stock market is poised to deliver on average 8-12% returns on an annual basis.

So let’s get back into the numbers and assume that you will only need the money for 10 years, you are going to retire today and there will be no inflation for the next 10 years, and that you are willing to spend your entire principle amount and you can get an average return of 8% on your money..You need roughly $265,000 to take a draw of $36,500 a year for the next 10 years (so the $200k is still a bit short of your goal). The amount of $200k sure doesn’t seem much now to retire on does it? Once you start factoring in inflation, years until you retire and lengthening the time you will be in retirement and drawing down your money the numbers will start to get worse and worse, and chances are you will need like $500,000 or so to really retire comfortably. Source:infobarrel.com

Types of Retirement Benefits

There are many types of retirement benefits as there are many types of agencies to choose from in taking care of your hard-earned money from years of working. The government itself empowers workers from receiving Social Security benefits based on the number of years of contribution and benefits you already have taken advantage for.
Some of the types and sources of retirement benefits are outlined below:
· Social Security Benefits
· Disability Benefits
· Private Savings
· Veterans benefits
Social Security Benefits
Social Security allows more people to profit from its exclusive and wide-range benefits. It has long history of providing excellent social benefits to contributors while occasionally extending support to non-members as well through its various humanitarian programs. To date, more than 96% of the American populations are members of the Social Security System.
The number of years of contribution determines the rate at which you will receive your contribution in the future. Basically, the later you retire, the higher the amount of pension and retirement interest you will receive from your Social Security.
Currently, the recognized full retirement age is 65 though one can retire by 62 and 67. Unusual cases where early retirement is possible are discussed below.
Disability Benefits
Some people who became less capable to taking care of themselves or werephysically incapacitated due to a traumatic accident can apply for disability benefits. Some even are due to health issues.
The good thing about filing for disability benefits is that, you can get the full retirement benefits as received by others who have fulfilled the full retirement age, although this one requires full medical certification from one of the accredited Social Security Hospitals.
Private Savings
Private savings and pensions are another alternative for individuals who want to maximize their pensions and health care benefits when they reach retirement age. This type of retirement benefit alternative is usually expensive for they require longer and higher contribution.
Veterans Benefits
Veterans and their families are protected by law to receive certain dividends from the government for various health care benefit programs designed specifically for them. Veterans are required to contact their local federal agencies on how to avail of their earned benefits during their full career as members of armed forces.

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Amount to Retire With

The question of 'how much money do I need to retire' is one that often gets asked but rarely gets answered. Obviously there are a number of factors that we need to consider when answering this question like
 
- How old are you going to be when you retire (will it be a late or early retirement)?
 
-          What do you plan to do once you are retired eg. Are you going to travel the world or baby sit your grand children?
 
-          Where to retire? Will it be in the suburbs or on the beach front property?
 
All of these questions need to be put into a retirement calculator in order for you to get an accurate answer to the question - how much do I need to retire?
 
RETIREMENT CALCULATOR
 
The first question you need to answer is - how much money would you like to live off per annum?
 
Let's use an average amount that would allow you to live a very happy and exciting lifestyle -
eg. $50,000
 
This amount will obviously differ from person to person, if you are planning on seeing every country in the world then I would imagine you would need a lot more money per year. Especially if you want to retire early! 
 
Ok, so we are going to do our figures on the annual retirement income of $50,000
How much money would we need to save in order to earn $50,000 of passive income?
 
This depends on how you are going to be getting this income but lets assume that through property, the stock market and some cash investments you can get a return of 7%. At the moment this may sound like an unrealistic amount but if you average this number out over time then I believe this is extremely possible. In fact I would say this is a very conservative estimate, especially if you have some financial knowledge.
 
So if you were to have $715,000 worth of ungeared investments eg. Shares or property that was earning you 7% per annum you would be able to draw an annual income of $50,050. By doing this you wouldn't even be touching your savings.   Let's get onto your own retirement planning
 
 
So how do you figure out how much you need to retire? 
 
Simply work out the amount you want to earn per year. Let's call it X
 
Then divide X by 7 and times that number by 100
 
This sum will give you the amount of savings or paid off investments that you will need to be able to retire happily. 
 
So is your number more or less than you thought? You may also like to consider that by using this retirement calculator means that you will never spend your initial capital. If you take this into account you may need slightly less than the figure you get. Now that we have answered how much money do you need to retire, it's time for you to start thinking about how to save that money.

Plan your Retirement now!

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