Barring a miraculous win in the lottery, I know that I need to save money in order to retire comfortably. What I don't know is exactly how much money I'm going to need, and I don't want to count on Social Security. If that government retirement program manages to stay solvent until I retire, there's a good chance that my estimated $1,100 a month payments will be greatly reduced.
If I assume my bills stay relatively close to what they are today, I need $1,500 a month to live comfortably. That includes my rent at $424, cell phone at $54, car and homeowners insurance at $80, gym membership at $10, electricity at $130, petrol at $80, food at $200, natural gas at $80, water at $40 and $402 for medical insurance and miscellaneous expenses. This assumes that I don't want to travel or spend a lot of money on recreation and leaves me with a yearly income need of $18,000.
According to the Census Bureau, I can expect to live to the age of 80, which means I have 45 more years of life ahead of me. Unfortunately, I don't know how healthy I'll be in my later years. I drink a lot of Coke. I don't eat as healthy as I should. I work at a desk job, and I don't exercise enough. My health will probably decline after 60. That means that if I want to enjoy any of my retirement, I should probably retire before 60.
Retiring At 50
If I want to retire at 50, I need to have 30 years of living expenses in the bank. At $18,000 a year, I'd need to save $540,000. I have 15 years before I turn 50. In order to make that work, I'd need to save $36,000 a year. That's more than I make a year and not feasible.
Retiring At 60
Retiring at 60 means that I need 20 years' worth of living expenses. With the current interest rates at 0 percent, I'm not going to factor interest into my calculation. If I did, it would probably be eaten by inflation anyway. To retire for 20 years, I'd need $360,000, and I'd have 25 years to save. In order to retire at 60, I'd need to save $14,400 a year or $1,200 a month. That's closer, but still not feasible with my current income.
Retiring at 70
I don't like the idea of working until I'm 70, but I may not have a choice. To live for 10 years without working, I'd need $180,000, and I'd have 35 years to save. Using this calculation, I'd only need to save $5,142 a year or $428 a month. This is feasible. I could conceivably save an average of $428 a month for the next 35 years. Of course, if I happen to get lucky and live past 80, there's a good chance I'll outlive my retirement savings.
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- Banking & Budgeting
- Personal Budgeting