Tuesday, November 25, 2008

Retirement is not THAT far away

Retirement seems like such a long ways away. I’m aware that it’s hard to put away money when there is so much “cool stuff” to spend it on right now. But unfortunately, the cash won’t suddenly appear the day you walk out of your job. You need to work on it…NOW.

How much do you need?

Experts say you should have enough put away so that you can live on 8% of the money that you have the day you retire. So you need to figure out how much you think you’ll need. Keep in mind that most of us plan to have a whole lot of fun at retirement, rather than being stuck at home or *gasp* still working because we haven’t saved enough money.

Let’s say that you retire with $500,000. Sounds like a lot, right? But in order for that money to last you until you die, that would only give you $40,000 per year to live on. Hopefully you’ll be done with mortgages and car payments and debt but then so you won’t need as much. But realistically, that probably isn’t going to be enough.

So what if you have $1 million at retirement. Technically you’d be a millionaire, and you’d have $80,000 to live on each year. Depending on what you wanted to do in your retirement, that could be enough money. But really – are you on track to have a million dollars at retirement? I can promise you that just relying on your 401K/pension is not going to get you anywhere near that.

But of course, none of this will happen if you continue to battle debt year after year after year.