If you're like most people, you've probably wondered: How much do I need to retire?
It's not easy to know how much you need to retire. You might not even know what you are having for dinner tonight, let alone how much money you'll need many years from now.
But it's good to think about the big picture. In general, the sooner you start to save, the better.
Any time retirement comes up, we HAVE to talk about saving. After all, that is going to be the number one thing that determines how much money you'll need to retire.
How Much Do I Need To Retire?
A quick rule of thumb for how much you need to save for retirement is that you'll need to save 25x your annual retirement expenses.
Which means that if you spend $30,000 a year on housing, food, car payments, health care, child support, etc., you'll want at least $750,000.
That seems like a lot, right? Well, it's not as much as you think once you realize that you won't need to save all of that from your paycheck.
By making smart investments and starting early, you'll see that it's possible to get there.
But it won't happen if you don't focus on it and work hard to get there. Don't let the fear of failure stop you from starting to save.
The reality is that most people are in debt. Clearly, saving isn't that easy! Look, we write A LOT about how saving money isn't easy at first. We know because it's something we struggled with too. So what's the point of this? Why not just take the easy way out and spend every penny the month it hits the bank?
The point of all of this is to:
1. Be financially independent
2. Increase your quality of life
We can't think of many things that would increase our quality of life like not having to work for the rest of our lives. Who wouldn't want to have the flexibility to be able to decide how to spend their time? Well, that's the whole point of this retirement calculator!
We built this retirement calculator because none of our friends or family members could give us a good answer when we asked them how much they needed to save for retirement. Literally none.
If you plan on retiring one day, you NEED to know when you can finally stop working! You need to be able to answer: How much do I need to retire?
What's our methodology?
We wanted to keep our calculator simple to use while giving you a good estimate of what to aim for as you plan.
We used the '25x Retirement Rule'. The 25x rule is an easy way to help you answer ‘How much do I need to retire'. The rule says that if you save 25x your annual expenses in retirement and have a 4% annual withdrawal, this should last you at least 30 years (barring any economic catastrophes in the early years of you retirement). For example, if you are going to spend $60K per year during your retirement, then your retirement savings goal should be $1.5 million. This is because $60K x 25 = $1.5 million.
If you plan to have a longer retirement then you should save more. If you plan to have a shorter retirement you can save less.
This tool shouldn't be viewed as the holy grail. It is only a guide to help you start your planning. Based on our loved ones, this guide will be a million times better than what most people are using to determine how much they'll need to retire!
How To Use The Retirement Calculator:
It's so easy! Simply enter your info into the awesome retirement calculator and we'll show you your estimated MONTHLY saving goal! If you aren't sure how much money you need to save for retirement, then look no further! You won't find an easier retirement calculator anywhere. Once you finish, head over to our guide to learn what to do with your money!
Comment below to let us know 1 specific thing you are going to start doing to get on track for retirement.
To get us started, we are going to cut down our electric bill by spending more time going for walks instead of watching tv!
Francisco Maldonado, MD is a personal finance expert who was raised in poverty by a single mother and had to learn everything about personal finance on his own. In addition to running his personal finance site, The Finance Twins, with his twin brother, his site has been featured on Forbes, Business Insider, CNBC, US News, The Simple Dollar and other top publications. Francisco is a physician who borrowed over $200,000 to pay for his medical training and understands debt payoff strategies and frugal living. He received his M.D. from the Mayo Clinic School of Medicine, the most selective medical school in the country, and a Bachelors degree in physiology from the University of Minnesota. He is currently a radiology resident at Northwestern University. You can contact Francisco here or via Instagram @thefinancetwins.