I see articles at least once a month with advice on how to answer the question of how much you need to save for retirement. These articles all have common themes to them but there is no consistent answer. It's an individual situation. Many articles say things like having 10 times your income is the answer. This might be applicable to the 64 year old who is getting ready to retire but what about a 30 year old who has her best income earning years ahead? Tune in to hear my take on this age old question.
You will want to hear this episode if you are interested in...
The loaded question the financial media loves to ask [0:21]
Why 10x your income isn’t right for everyone [1:27]
Know what you spend! [3:18]
Projecting what retirement will look like [4:18]
Knowing your inflow numbers [5:07]
Getting a back of the napkin rough estimate [6:00]
The sales tip section: Accomplishments [7:29]
This week’s FLASHBACK [8:33]
Inflow, outflow, and nest egg estimates
When trying to figure out what you need you must first know what you spend. You can’t possibly know how much you will need to save if you don’t have a clue what your monthly expenses are or will be. You will also need to know your inflow. How much “guaranteed” money will you have coming in? Social Security and a pension are some more common sources but you may have others.
Once you know your inflow and outflow then you can get to work! You will take the difference between those numbers and divide it by 4% to get a very rough estimate of the nest egg you will need to have. Check out the episode for more details on the next steps!
The sales tip section: Accomplishments
As we approach the end of 2020 I would like to recommend taking the time to write down what you've accomplished this year. This can be connected to goals you set for yourself, or just other things you want to recognize as you reflect on the year. Maybe you had a goal of reading a book a month, saving more money to pay down debt, or putting more away for a future goal. Perhaps these weren’t goals that you had set at the beginning of the year but are things that you accomplished and should celebrate regardless. It can be hard in the moment to think of everything you have done during the year but take a few minutes and start jotting them down over time. I know it helps me feel better.
This week’s FLASHBACK: Odd trends
One of the oddest trends from my freshman year of high school was Jams. I have no idea where they came from and why they were such a big hit. All I know is I needed a pair or two of these shorts. If you don't know what they are Google Jams shorts of the 80s’ and you’re in for a treat. They were these loud shorts with obnoxious patterns! What you wanted to do was find a pair none of your friends had. I recall whining to my mom that I had to have a pair before I went on our freshmen class trip. Fortunately, my mom obliged. I just remember a bunch of us having them and thinking we were the coolest thing ever...at least until the next big thing came along as it always does.