My Ever Expanding Retirement Goal |
7 Comments |
I have had a lot of difficulty figuring out what my retirement goal should be. I’m not alone in having this difficulty - after all retirement planning is an industry on it’s own. The biggest problem I’m having is trying to project 35 years in the future.
The more I think about it, the race towards retirement is going to be a journey. That being the case, it makes sense to update the goal along the way. Why not start with today? How much would I need to retire tomorrow? The answer to that question is also the answer to “How much would I need to replace to my income?” I think I’d be very comfortable with a 100K income. Working backwards from that, at 8% interest, I’d need about 1.25 million today. Over time, that 100K income will buy less (thanks a lot, Mr. Inflation), so I’ll be raising the goal even as I chase it.
Can I run faster than inflation? Join me for the journey and we’ll find out together.
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December 7th, 2006 at 4:19 am
If you make 8% on your money, and inflation is 3-4%, would your goal be closer to $2-2.5 mil? I see 4% interest quite a bit when it comes to estimating your retirement goal - I do not know if this is a safety net or compensation for inflation. This is a loftier goal, but may keep you from chasing a number based on Mr. Inflation.
December 7th, 2006 at 8:13 am
CrookedOne, I believe you are correct. I had tried to factor out Mr. Inflation, but forgot that he comes back each year. I also haven’t factored Mr. Tax Man, though a lot of my retirement savings are in tax-deferred accounts.
I will have to update my goal to reflect that loftier goal.
April 16th, 2007 at 12:02 pm
How liquid is your net worth? Are we talking equity in a house, 401k, prosper, etc?
April 16th, 2007 at 2:06 pm
Not very. It’s almost all real estate (what used to be my primary residence), 401K, Roth IRA, and Prosper (semi-liquid as I get some money back each month in the form of interest and principle payments).
Some would consider this a huge concern, but it’s done intenionally. I have an ample HELOC for emergencies and my fiancee has a similar safety net and more liquidity. We also each earn more than enough money to live off of one income if one of us were to lose our job. She has probably some of the best job security in the world, with government/military position.
Mine’s not quite as good, but when I say I could have a new job in less than a week, I’m not joking. Silicon Valley is hopping with venture capital now and every engineer is at a premium right now it seems.
April 24th, 2007 at 9:34 am
Have you considered trying to increase your liquid holdings to help meet your alternative income goals? Being more liquid and using the stock market to help generate some cash flow could get you where you want a little sooner. I’m a little older than you and my alternative income goals are higher. I’m averaging about $1500/mo now and started the year with $34k invested. I hope to be above $2,000/mo before the end of the year due to extra money I’ve deposited and the reinvestment of my monthly proceeds.
Inflation is a b1tch, but don’t forget that it helps you get pay raises too. Throw that factor in to the formula - your 401k and investment account contributions should grow as your income does.
June 14th, 2007 at 9:51 am
Take a look at this retirement calculator, it handles inflation, social security, etc. I think it’s the best calculator online to see how much you really need to save.
http://firecalc.com/calc-research.php
November 12th, 2007 at 11:12 pm
It is great that you are actively pursuing the goal of retirement and savings.
Don’t forget to live life today though.
I like to see that you are well on your way with a net worth of over $229k
I am 19 and have net worth of $16,000 I want to have a net worth of over $1,000,000 by the time I am 25.
Do you think I can do it?