I know people say that money can’t buy you happiness, but I’d be pretty dang happy laying in a hammock in Fiji.
How much money do you actually need to make it to Fiji when you retire? That’s exactly what I’m answering below!
So – how much money do you need saved to be able to retire where it’s nice and breezy with Uncle Kracker instead of working at Walmart as a door greeter when you’re 80?
Short Answer: Enough to pay all your bills + some.
Long Answer: There’s honestly more than one scenario when it comes to retirement and it solely depends on what you want to do with your life after you retire.
If you’re a total homebody and a scrooge down to the core with no agenda of having fun after you retire at 65, then you could (maybe) get away with having $1 million saved.
On the flip side, if you’re counting down the days when you’ll be hula dancing in Hawaii for 6 months out of the year you’re going to need to bank over $1 million.
Let’s Break Down the Costs:
Since there’s no set number of how much YOU need to retire (since everyone’s circ*mstance is different) there is an average of what retirees are spending per month. According to NerdWallet, it’s around $3,800 a month.
With housing and transportation being the highest 2 of those (I know, shocker, you still have to sleep somewhere and drive places after you retire.)
Other expenses you have to consider are health care, as those go up just as your age does. And any traveling you would like to be doing … please don’t be a homebody.
If you’re completely comfortable living on about $45,000 a year you’re looking at having in the bank between $680,000 and $800,000.
If you’re wanting to spice up your retirement, or live somewhere decent, plan on over $1 million.
What will you be bringing in after you retire?
Ideally, you’ll have all the retirement you have saved up BEFORE you retire, (and highly recommend this), however there are circ*mstances where you may still have income even after you retire. And no, I’m not talking about social security. Please don’t rely on our government to help you pay your bills.
The average amount Americans have saved in a 401K when they retire at 65 is around $96,000.
If you retire at 65, on average you will live another 14 years (or more).
That puts you living on $6,857.14 a YEAR from your 401K.
That hammock in Fiji is now looking more like a hammock in your grandkids backyard … and really it’s just a worn out lawn chair.
BUT – If you’re to keep a certain amount of retirement in your 401K after you retire, depending on what it’s invested in, you could get a rate of return between 5-8%. That would be ~ an additional $6,000 per year if you left the $96,000 in there. And it would continue to grow.
There are also real estate investments and other passive income that can contribute to a funded retirement.
How much do you really need saved up?
You should be saving/investing 15% of your income for retirement.
How much money do you need to retire by age ….?
Even when saving for retirement you need to have goals.
For a good retirement goal by age 30 you should have saved 50% of your annual income.
This doesn’t have to be all in one place, it can be in 12 different places. Whether you have it stashed under your mattress, buried in your backyard, or all in a Roth IRA, it’s up to you.
And according to Investopedia:
How much money do you need saved for retirement at 40?
- DOUBLE your annual salary
How much money do you need saved for retirement at 50?
- FOUR times your salary
How much money do you need saved for retirement at 60?
- SIX times your annual salary
When thinking about how much retirement you’ll have, you have to remember where it’s all coming from. Are you planning on just social security (please don’t), or are you relying on your 401K and other investments?
Look at all your options, but don’t rely on just one. If social security falls short you need to have a back up.
Isn’t my 401K enough?
The popular question everyone asks is, “Isn’t my 401K enough?” Don’t we wish!
The short answer is no. If you’re spending time looking up how much money do you need to retire or on saving money, you probably don’t have enough.
Remember that $96,000 above that the average 65 year old has in their 401K? Yikes!
How much will I get from social security?
If there’s anything you get out of this post let it be this : PLEASE DON’T RELY ON SOCIAL SECURITY. The average check American’s are getting in 2018 from social security is $1,404. This is not enough.
Social security is all based on your highest 35 years of income pre-retirement. So you could get more, or you could get less.
Relying on the government for your retirement will cost you and is just not smart. And you definitely won’t be taking any vacations to the Caribbean with it!
How soon should I start saving?
ASAP!! There’s no time that’s “too soon” when you’re thinking about retirement. Obviously, the younger the better.
For those who are in their early twenties I suggest starting out with a simple Roth IRA and contributing to your 401K if your employer offers one. Always contribute the amount they’ll match up to. Don’t turn down free money!
- You can also dip your feet into other long-term investments.
- Stay out of debt and
- Pay with cash so you’re not too far behind as you get older
People in their thirties should be getting close to, or already, contributing 15% of their income into some sort of retirement, whether it’s your 401K or a Roth IRA. l
In your forties you’ll want to start maxing out your retirement. Make sure your debt is non – existent.
It’s okay to stop your retirement investing to pay off debt. You don’t want to go into retirement owing money.
You’re getting into your fifties and sixties and you’re still throwing as much money as you can into your retirement savings.
Also getting closer to having your house paid off and hopefully, no more debt!
What if I’m close to retirement age, but don’t have enough retirement?
You may be thinking, “It’s too late to start saving now.”
That is so false, because it’s never too late!
By starting today, you’re one step closer to getting to your retirement goal.
Of course you’ll be better off starting early, but there are plenty of ways to catch up no matter what age you’re at.
The first thing you’ll want to do is:
- Pay off any debts you have besides the house (you’ll get to that later). I know, easier said than done.
- Next you’re going to find any way you can to increase your income. Whether that’s taking on a second job, getting a pay raise, or cutting spending you’ve got to increase the dough!
- Max out your 401K AND a Roth IRA. Throw every extra penny in there and keep it there as long as you can.
What else can I do to grow my retirement?
First things first – you’ve gotta read Chris Hogan’s book, Everyday Millionaires. Hands down, top book for helping you get to that $1 million dollar threshold.
As much as we’d love to dream up a money tree (trust me, I’ve tried), nothing’s going to happen unless we take action.
Ugh, I know. Taking action. The two words every procrastinator avoids like the plague.
You don’t even have to be a procrastinator to avoid it.
Roughly 6 in 10 Americans don’t even have enough money to pay an unexpected bill of $500 – $1,000 – without putting it on their credit card. Getting prepared now can save you when you get to retirement age.
If you can’t take care of things that come up now, how are you going to do that when you’re retired? There’s a few things you can be doing now to make sure you have a happy, healthy wealthy retirement.
- Pay off debt ASAP
- Max out your 401K
- Aim to put 15% of your income into retirement every month
- Invest in a Roth IRA
- Start your retirement early
- Increase your income
- Start budgeting and taking control of your income
- Automate your savings
- Invest extra cash
- Get Chris Hogan’s book, Everyday Millionaires
You are now well on your way to a happier, Fiji hammock-hangin’, Hawaii hula-dancin’ retirement.
