What’s Your Number?

by Kay Lynn

Remember the commercials  for a financial services company showing people walking around with various numbers?  The number was the amount of money needed for retirement.  It varied by person, but of course the company could help you get to your number.

I didn’t think much about it at the time other than the fact that they’re trying to sell you something (and of course that it would be silly for people to walk around with a number over their head).

A recent discussion with friends about how much we needed to save for retirement brought it to mind.  How can you plan for retirement without knowing how much you need to save? 

Retirement Calculators

The company that is used for my work 401K has a retirement calculator.  I would guess most financial service companies offer one.  They pretty much work the same. 

Enter pertinent demographics, current savings, planned savings and it calculators your shortage or overage you’ll have when your estimated lifespan ends.

The problem is that the estimated income required to live on doesn’t seem realistic.  I don’t believe I will need as much money in retirement as most calculators state.  A better number to calculate required income would be to use amount of money required for expenses each month versus income.  If I don’t spend all I earn, why would that the starting point of figuring out what I need for retirement?

Rethink Expenses

Many expenses are eliminated once you are no longer working.  401K contributions, commuting expenses, and professional expenses will be eliminated. 

Will your housing costs change upon retirement?  We plan to change our housing situation (link to previous post).  No matter what we do, the mortgage will be eliminated before retirement so that expense will be gone. 

Will there be new or increased expenses?  Health care expenses will probably increase due to higher utilization.  Many retirees spend more time traveling (at least initially) now that pesky work is no longer an impediment.

 Number, Number

You need to know your number for reliable retirement planning.  My number is $450,000.  So, what’s your number?

Content © Bucksomeboomer  2009-2010. All Rights Reserved

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JoeTaxpayer January 13, 2010 at 10:40 am

Wow, that’s about $18K/yr, right? Not bad, I’m assuming social security, and maybe some other income. $450K seems a pretty doable number.

Grace January 13, 2010 at 2:45 pm

I’m not sure what my ultimate number is, but I’m pretty sure it’s less than yours. There’s no way I need (although I probably could spend it if I had it.) my current income in retirement. Not only will I not have a house payment nor a car payment, but I also won’t be saving over $1000 a month toward my retirement! I agree that most of the retirement calculators I’ve used seem very high.
.-= Grace´s last blog ..A Contest That Looks Good =-.

Financial Samurai January 16, 2010 at 6:13 pm

That’s great your number is $450,000! Hope SS can help out and will help out.

I have to say sheepishly that mine is around $3 million at least, and more like $5-7 million. That said, I know I will get there if I work for the next 10 years. Hope i don’t burn out!
.-= Financial Samurai´s last blog ..Where Americans Pay The Most To Live And Why =-.

Bucksome January 17, 2010 at 6:31 am

Hi Sam,

I’m planning on SS. This number does not include our home which is now worth around $400 thousand. That’s always an asset we can sell if needed.

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