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Learn how you two can figure out how much you need for your nest egg!
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Earlier this week we talked about how easy it is to open and start contributing into an IRA. Preparing for retirement is a huge goal, one that many couples stress over.
And one of the biggest questions on people’s minds is – How much do we need for retirement?
Today I’ll show you how to get that amount.
Finding Your Retirement Number
Even though everyone is different, I think we can start with a few assumptions:
- You want to be able to live on your retirement income and,
- You want it to last through retirement.
We can’t predict what your retirement will be exactly but we can get a ballpark figure that you can use for your investing plans.
We’ll be using a safe withdrawal rate. Basically this is the maximum you can take out each year without depleting your nest egg.
I’ll be using 4% as the rate. What you want to do is take your annual spending and multiply it by 25.
- If your spending is $35,000/year then you need to save $875,000
- If you two spend $70,000/year then your nest egg will need to be $1,750,000.
- And if you two spend $125,000/ year set a goal of $3,125,000.
As you can see, lower your annual expenses has a HUGE impact on your nest egg goal. One of the best ways you can help yourselves is to optimize your spending now.
This isn’t about depriving yourselves, it’s about finding the best ways to spend your money, cutting out the frivolous expenses.
Is 4% the one size fits all solution? No, but it a practical starting point for the two of you shoot for.
Opening and Contributing to Your IRA
Once you have your retirement contributions in place, you can always dig deeper and create a more personalized plan.
If you haven’t started saving and investing for your retirement, go head and do it. You can open an IRA in about 20 minutes and you can automate your contributions.
If you’re ready to begin, please check out any of these:
Until next time, take care!