Could you Retire on 3.5 Million

Many people think having a Million dollars in their retirement accounts that they are set. But are they? How much do they really need? That is the true Million Dollar question. Our goal is 3.5 Million for both of us to be retired on our current lifestyle.

What is our current lifestyle have to do with retirement? We all get used to living a certain way and have our spending habits. When people retire they have more time to spend more money. Yes, you do save some money by not driving to work each day, not buying work clothes or lunches with co-workers. But some people can end up spending more in retirement fun then they did on working.

As you have read hopefully in my disclaimers I am not giving you financial or legal advice. I want to give you things to think about and hopefully you have time to make any adjustments that you need to now so someday you can retire in the lifestyle you want.

I know many people in their 50’s, 60’s and 70’s that have no plan on ever retiring since they have little money saved and also they have debts such as a mortgage, car, credit cards and student loans.

I strongly suggest finding a Financial planner that you feel comfortable working with. We are with Fidelity currently but also like Charles Schwab. Here are some things to think about;

1. Get Debt Free – Being retired is hard if you have any debt payments such as a house or car loans. Also having Student loans and Credit cards are good to have paid off. Being debt free allows you to possible need less money to retire on.
2. Future Medical Insurance and Bills – Medical Insurance and Bills can cost you a lot in your retirement years. Elizabeth O’Brien wrote for Money August 19, 2018 and she said an average could retiring at age 65 will need $280,000 to cover health care and medical costs in retirement. If you want to retire before age 65 the cost will go up. For myself and my wife we had Health Insurance priced out at around $10,000 a year that we would retire before age 65. If our kids would still be at home and in school that could cost us another $10,000 a year. Ouch…
3. Future Inflation Costs – For instance I used an Inflation calculator to see what inflation ran from 1980 to 2018 and it has averaged 2.95%. If you take $50,000 expenses currently at 2.95% inflation then in 38 years your expenses could be $150,929 a year. Will your retirement account be large enough? If you only plan on being retired 20 years than with inflation it could cost you $89,433 a year to cover your expenses not counting any added expenses as medical expenses and others.
4. Car expenses such as a new Car if your other car wears out. Our goal is to have new vehicles before we retire so hopefully we can make them last us through our retirement years. Do you have enough extra savings to do that also before retiring?
5. House Expenses – Things wear out on your house that cost a lot of money that people don’t plan on or think about. Depending on how long you will be retired think about this. In Arizona a Water Heater lasts about 5 years and costs about $1,000 or more installed. A new AC unit that is very important in Arizona currently costs about $7,500 to $12,000 in 2018 years to last about 10 to 15 years. Roof repairs or replacement can run about $15,000 to $20,000 in Arizona they say for our size house and lasts about 20 to 25 years. What will it cost with inflation in 20 to 30 years? Looks like more money that is needed to have saved.
6. Kids expenses – Do you want to help with their College or Marriage expenses? Do you want to help with their first home or first car? It is a very important topic to talk about. We have told our kids we won’t be helping with any of those expenses and they need to save for them.
7. What will source of income do you plan on having during retirement years? Social Security is only about 30 to 40% of what you need to live on I have heard from different people. Some people have retirement savings from their jobs. Some have a pension plan from their jobs. Some people have investments in Real Estate, Stocks or others. We currently plan on Social Security, Pension Plan, 401K accounts and Dividend stocks that we own.
8. What plans do you have for retirement years. If you both plan on traveling the world or golfing every course in the USA then you will probably need more retirement savings then if you plan on staying at home and playing cards.
9. Know what your living expenses truly are. If you don’t track your expenses currently I would suggest that you start now. We track ours daily and have done it for years. We have a budget and compare our actual expenses against our budget monthly. We also do yearly compare. We have a great grasp on our current expenses and feel secure about our future retirement plans.

We could talk days on more expenses that you could have during retirement and how much you will need to have in the bank to retire on. Our goal is 3.5 million dollars.

Some financial planners say that a good with drawl factor to be able to live off your retirement years can vary. This will vary on how many years you plan on being retired of course. Some say that at 3% withdrawal rate will last you about 30 years. Some say 5% could last you about 20 years. If Mrs. RE wants to Retire before age 65 to 70 we need to plan on about 2%.

Mrs. RE if she retires before age 65 then we also will have to factor in added Health Insurance costs. So that brings us back to our 3.5-million-dollar goal if she wants to retire before age 62. She may work part-time to keep her insurance active till age 65.

We review our plans each year to check our progress. We track all expenses and income each month. We also track our investments each month. If you don’t currently maybe it is time to start now and find a Financial planner that you feel comfortable working with.

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