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Investing/Strategies / Retirement Investing
|Subject: Re: Retirement Needs Formula?||Date: 10/4/2013 5:08 PM|
|Author: pauleckler||Number: 73433 of 75824|
Once upon a time Motley Fool had a worksheet that walked you through the whole process. They even had on line short courses to help people work their way through the process. I helped with one of them.
Last I heard, the worksheet was now part of the Rule Your Retirement premium service.
The $50,000 in yearly expenses gives you a number to work with. But of course, you need to come up with an inflation number to estimate what that number will grow to over time. You also need a % return estimate for your investments.
The worksheet works you through considering all your sources of income from Social Security, pensions, annuities, etc and then calculates the remainder that must be funded from your investments. That is where the 4% rule usually comes in. Personally, I think the 4% rule works provided your average return is 8% or better. Then theoretically your net worth increases every year, and that 4% gives you more money every year as your investments grow.
Keep in mind that 4% is the minimum you should consider retiring on. If your investments do well and you get to 4% before age 60, you have the option to continue working and building in safety reserves. I think that is a good idea.
In retirement there always seem to be expenses not considered. I retired at age 53 and thought I was well off. I did not anticipate that health insurance costs would rise from the $97/mo I was paying for my employers plan. I also went through the dot com bust. Even though the dot com boom made my numbers look good.
If you have years to go, let's hope you too go through an era where stocks do well. And if so, do position yourself to take full advantage of it. In the dot com boom, too many were late to the party, bought in high and lost. Those who got in early had losses too, but mostly on paper. They lost other people's money.
Keep in mind, all these numbers are estimates. Accurate guesses are rare. But if you hit in the ballpark, you can always adjust as you go along.
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