Top 3 Retirement Planning Questions

By: Ramsay Mameesh

There are three fundamental retirement planning questions, that are universal to everyone, no matter their age, income, or wealth. More than investments, asset allocation, or tax strategy, people want to know the answer to the following three questions:


  • When can I retire?

  • How much savings do I need for retirement?

  • How much can I spend in retirement?


The most important of the three questions, from a
retirement planning
perspective, is the last one - How much can I spend in retirement?

How much can I spend in retirement?
How much you can spend in retirement, is based on how much you have saved for retirement, divided by an annual safe withdrawal rate of between 3% to 4.75% depending on your age at retirement.

A better, and the more important, question to ask is "How much do I need to spend in retirement?" To answer this question you will have to create a retirement budget.

Creating a retirement budget, insures that you will not run out of money during retirement, and it allows you to answer the other two retirement planning questions.

How much savings do I need for retirement?
How much savings you need for retirement, depends on how much you spend in retirement (your annual retirement budget), divided by an annual safe withdrawal rate of between 3% to 4.75% depending on your age at retirement.

The amount you need to save for retirement, is the amount of money you will need, to cover the cost of your retirement. The cost of your retirement is your retirement budget, which we calculated, when we answered the previous question - ?how much can I spend in retirement??

When can I retire?
When you can retire, is determined by when your savings can pay for your spending in retirement, based on your retirement budget. So, if your retirement budget is $3,000 per month, you currently have $600k, you need $900k to pay for your retirement, you save 25k per year, and your investments earn 10% compounded annually - you can retire in 3.5 years.

Did you notice, that the common thread in answering all three questions, was your retirement budget? That is because creating a retirement budget, your spending plan for retirement, is the key to calculating how much you will need for retirement, and to figure out when you can retire.

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