If you plan on retiring at age 65, then you want to have a target number in mind – and it shouldn’t just be a multiple of your current income. What’s the answer?
Take a look at the video below and find out what I think.
The transcript follows.
The answer to this question is highly dependent on how much your expenses are, how much Social Security you’ll receive, and if you have any other income streams like a pension. There is no magic number, and I don’t particularly care for the notion that you need to have a portion of your income saved up, as, unless you’re on the hedonic treadmill, your expenses and your wages shouldn’t necessarily be correlated.
Therefore, I’d look more at a factor of how much you spend and what a safe withdrawal rate is. Conventional wisdom is that a safe withdrawal rate for a 65 year old is 4%; however, recent research by academics like Dr. Wade Pfau, CFA, points to a lower rate.
There is no magic number or formula to tell you the answer. I’d advise you spend a few hours with an hourly, fee only financial planner who will give you more insight and not try to sell you a bunch of useless products in the meantime.