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This discussion came up at work the other day and I was surprised at how many different responses there were. The general idea is as follows:
You are given $x to retire today and live the rest of your life on. How much money do you need?
Obviously the amount will differ based on personal factors; age, current savings, family size, but I'm really curious what amounts people come up with and what their reasons are.
I have two different answers, but first my general about me:
25 years old, married, no kids, no desire for children. Limited savings and fairly significant debts through student loans and mortgage.
First response: $4 million
I used a general assumption of 40% for taxes (state and federal) which will drop gross to about $2.4 million
From there, we have about $300K in debt, between mortgage, student loans, car loan, and credit cards. This leaves $2.1 million.
I'd want $100K set aside for 1 years worth of expenses. This is on the high side (we don't make that much per year after taxes today, and without our monthly debt, we won't need to spend as much) but I feel is a safe amount.
My goal is to have a passive annual income of $100K (see above) so assuming I can reach about 6% in the stock market (mostly dividend payers) investing about $1.75M in the market would give me the annual income I'd want.
This leaves about $250K which I'd put towards home improvements and/or selling our starter home and buying a nicer one.
Second response: About $72 Million
This is the "be able to buy whatever I want" answer with really wild guesstimates for costs, assuming living until I'm 80.
Income tax close to $19 million
Dream house $30 million
Property Tax about $7 million
Charity Contributions $5 million
Stock Market $2 million
Groceries/Restaurants about $1.5 million
New Cars about $1 million
Utilities about $1 million
Vacations about $1 million
College (student loans/tuition for my entire family) about $1 million
Insurance about $1 million
Medical expenses about $1 million
Max IRA contributions about $400K
Computers - Upgrade every 2 years $300K
Furniture about $200K
Gas about $200K
So what would you say? How much money would you need to be able to live the rest of your life in the way that you most want?
This discussion came up at work the other day and I was surprised at how many different responses there were. The general idea is as follows:
You are given $x to retire today and live the rest of your life on. How much money do you need?
Obviously the amount will differ based on personal factors; age, current savings, family size, but I'm really curious what amounts people come up with and what their reasons are.
I have two different answers, but first my general about me:
25 years old, married, no kids, no desire for children. Limited savings and fairly significant debts through student loans and mortgage.
First response: $4 million
I used a general assumption of 40% for taxes (state and federal) which will drop gross to about $2.4 million
From there, we have about $300K in debt, between mortgage, student loans, car loan, and credit cards. This leaves $2.1 million.
I'd want $100K set aside for 1 years worth of expenses. This is on the high side (we don't make that much per year after taxes today, and without our monthly debt, we won't need to spend as much) but I feel is a safe amount.
My goal is to have a passive annual income of $100K (see above) so assuming I can reach about 6% in the stock market (mostly dividend payers) investing about $1.75M in the market would give me the annual income I'd want.
This leaves about $250K which I'd put towards home improvements and/or selling our starter home and buying a nicer one.
Second response: About $72 Million
This is the "be able to buy whatever I want" answer with really wild guesstimates for costs, assuming living until I'm 80.
Income tax close to $19 million
Dream house $30 million
Property Tax about $7 million
Charity Contributions $5 million
Stock Market $2 million
Groceries/Restaurants about $1.5 million
New Cars about $1 million
Utilities about $1 million
Vacations about $1 million
College (student loans/tuition for my entire family) about $1 million
Insurance about $1 million
Medical expenses about $1 million
Max IRA contributions about $400K
Computers - Upgrade every 2 years $300K
Furniture about $200K
Gas about $200K
So what would you say? How much money would you need to be able to live the rest of your life in the way that you most want?
I think the second answer is awful. 72mm gross - 19mm taxes = 53mm net and you are going to spend nearly 60% of that on a single house?
Yet another "How much is enough?" or "What's your $number" thread. This proposition is faced by everyone and frequently addressed on the CD Retirement forum. Everyone tries to predict the $$'s it will take to maintain the lifestyle they envision ... for an indefinite number of years ... with no crystal-ball view of future inflation, taxes, healthcare costs, career forecast or provisions for unexpected changes. At 25, there are simply too many unknown variables and, unless one wins a big lottery, few have any real likelihood of achieving the imaginary (and meaningless) $72 million.
On the other hand, those of us who are already comfortably and happily retired, generally have an assured lifetime income stream with a COLA (pensions, annuities, SS, other); Sufficient resources to sustain one's asset and lifestyle standard in the face of probable inflation and increasing taxes; Healthcare and LTC resources to match one's health and genealogical history; and Enough to 'help the kids' and leave a meaningful inheritance.'
The biggest issue and uncertainty for most (without an assured, lifetime income stream w/COLA) is achieving a large enough 'nest egg' to produce a lifestyle-sustaining income, ... without depleting the principle. Without that, one can be pretty well 'set for life' ... for much less than many expect. Otherwise, everyone has a different number, which becomes whatever one has, when it is time to retire.
"set for life" at my current age (35) is going to look very different than "set for life" at 50 or 65...
I don't even know how to approach the question.
I have no interest in living like the 1%, but I would happily welcome their level of financial security. I assume I wouldn't need $72mm or even 10mm to always have a safe, comfortable home with food, health care and transportation. Everything else is icing on the cake, and currently we're thick in icing
We're shooting for $2mm at retirement, but my husband is the kind of individual that'll stop working only when he's dead.
I am 31 and plan to have kids still, so I would say 5 million would be needed for me to retire right now and never work again. I could probably do it on 3, but I would feel very comfortable on 5.
I need all the money before I will retire comfortably. ALL OF IT.
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