Ready For Retirement How Much Do I Need to Retire? (3 Simple Steps to Determine the Right Amount)
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Apr 15, 2025 Curious if $2 million is enough to retire at 60? Discover a simple 3-step process to calculate your actual retirement needs. Learn how to accurately estimate retirement expenses beyond your current salary, and factor in potential income sources like Social Security. Delve into crucial factors such as uneven income, taxes, and the impact of losing a spouse on your financial plan. This insightful discussion offers practical tools to ensure you approach retirement with confidence.
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Example of Calculating Retirement Expenses
- James Canole uses an example starting with a $100,000 salary to show why retirement expenses differ from current income.
- He subtracts payroll taxes, 401k contributions, mortgage payments, and estimates taxes to narrow expenses to $53,000 in retirement.
Use Dual Methods for Expenses
- Use both a top-down and bottom-up approach to estimate retirement expenses.
- Start with your current income and adjust for changes; also tally every spending category for accuracy.
Subtract Non-Portfolio Income
- Calculate your retirement expenses, then subtract expected non-portfolio income like Social Security or pensions.
- Focus on the remaining income gap to determine portfolio needs.