How much money should you have saved before you retire?

Question

How much money should you have saved before you retire?

Answer 1

Enough to pay the expenses you will have an live comfortably.  Thats different for each person and requires some assumptions and forecasts about how much your investments will make and your expenses at retirement.

Answer 2

You should have mortgage free housing, no debt and enough discretionary income to enjoy your retirement.  Of course, other important items are health care, insurance, and several streams of income like from pensions, IRAs, dividends, interest, rental income and social security.  If you have these items in place you should be ready to retire.  

Answer 3

At least $500,000 split into 5 FDIC insured interest-bearing accounts. The interest alone will be enough to live on.

Great website to visit on this subject:

http://www.early-retirement.org/

Check out the forums.

Answer 4

This is a somewhat more difficult question to answer than it appears on the surface.  The reason is that the future inflation rate is an unknown and it drastically effects the amount you will need. Another requirement is the amount of income you will require upon retirement.  Let's make a few assumptions.  1. your house will be paid for so you will not have a mortgage expens.  2.  Social security will still exist and will provide you with about $24,000 annually in current income.  This of course may not be the case.  3.  you will not care whether or not you have any money left when you die.  4.  medicare will still exist.  5. you and your spouse might live to age 95.  6.  at least in your early years of retirement you might want to do something besides watch TV. 7. there will be no pension.

Given those assumptions,  you will most likely want to generate an additional $40,000 minimum in additional current income.  Assuming 6% annual return on your investments at retirement,  then you will require a minimum of $667,000 to generate that income in current dollars.  Now let's assume that you are 30 years old and will retire at 65 and that the inflation rate will be an average of 5% annually.  This is a pretty high inflation rate, but it has been much higher in the past and because it has been only at 3% these past couple of years is no reason to assume that it will continue so.  It might possibly average much higher than 5%.  In 1980 I believe it was about 16% annually.  So in 35 years 1 dollar today will be $5.52 since then. Your $667,000 today then becomes a requirement of $3,681,840.  Shocking isn't it?  You can thank Uncle Sam and his free money policy for that.