How Much Do You Need to Retire?

by : Ryan

Many 401k plans and calculators show you an estimate of how much you are can expect to have by the time you reach retirement, but there are a few important things that many of these calculators don't take into consideration.

Generally the first part of preparing for retirement is developing a saving attitude and putting money towards a tax sheltered retirement fund, such as an IRA or a 401k. If you are doing that, congratulations. Some 40% of working professionals do not take advantage of their employer's retirement program and are leaving money on the table.

Once you have developed that saving attitude and started to regularly contribute to your retirement fund, the next step is to make sure you are actually saving enough so you will have enough money to get you through retirement.

There are two main issues that need to consider when analyzing if you are saving enough to make it through retirement. The first is time. How long do you think you will live? Sounds like kind of a morbid question, but the truth of the matter is that people are living longer and longer. Therefore, people may need more money than they planned for to make it through retirement.

The second thing to think about is what will your dollars be worth when you retire, considering that there is a 3-4 percent annual inflation rate. A 20 year old preparing saving for retirement will need several million dollars, and even someone nearing retirement may have another 20 years of inflation to compete against