How Much Do You Need to Retire?

I get this question a lot. Everyone, from 16-somethings to people who are latecomers and are trying to do something at the last minute, want to know how much is enough. There are a lot of good answers, meaning answers that people will accept, but to be honest, there is no one answer that will make everyone happy.

As with any personal situation, and money is one of the most personal things you will ever talk to a person about, it all depends what the person has in mind to do with their retirement. Some people want to travel, while others want to slow down their lives and just enjoy their retirement years one day at a time. Some people have already traveled the world as part of the job and cannot stand one more minute waiting in an airport, while others have been tied down to their jobs all of their lives and can’t wait to pack.

So the first question to ask yourself, and that I ask, is what do you want to do with your time? It may be the most important question, because if you do not have enough money to do what you want, then having a million dollars may not be enough. Family is an important issue connected with the money, because many families these days are scattered around the country, or even around the world. Some people have very nice homes and their children come to visit them. In fact, the older retirees prefer it that way.

Speaking of homes, many people have already finished paying off their mortgage, though the number of people ale to do so is much smaller now than say 10 years ago. That Great Recession hit a lot of older people pretty hard, so you see them struggling to recoup some of their huge losses by working longer to pay off their mortgage. Figure about 30 to 40 percent of your monthly paycheck will end up paying for the place you live in. When you retire, that money will have to come from somewhere, and consume a good portion of your retirement income. Now flip it and ask yourself what you would do if the 30 or 40 percent was in your hands. So paying off your mortgage should be a key as to how much you should save. Again, if you save a million dollars and 40 percent of that pays for your mortgage, how much have you really saved?

That is why I said there really is no good answer that will make everyone happy. If you cornered me and forced me to tell you how much, I would say as a ballpark number, take the current amount you have left to pay on your home, decide what you want to do and multiply the cost of that by 5 and add that to the mortgage, and add another $500,000.