February 11, 2014

How much will we need to retire & what it will take to get there

When it comes to how much to save for retirement, I tend to just save and ignore the fact that we're probably not saving enough.  Mr. R is 7 years older than me and I would love to be able to retire at the same time as him.  This is our current monthly savings for retirement:
  • Mr. R - $100 ever 2 weeks in a 403b (no company match)
  • Mr. R $80 per month in an IRA
  • Mrs. R - 6% of income into 401k (4% company match)
  • Mrs. R - $40 per month in IRA
Total Monthly Savings - approximately $500 per month

I used the retirement plan calculator on Wells Fargo's website.  If I retire at 60 and Mr. R at 67,  they recommend that we save $1211 per month!!!  And that's if we still continue to have income from our rental property. (Which I only calculated at the current $325 in income we have each month after all the bills are paid.  That will obviously increase once the mortgage is paid off.)  

$1211 per month is not possible for us.  And if we do this, they project we may receive $12,331 per month at the start of retirement.  Really?!  Damn.  That's way, way more than we make now.  I know they add in increases in our income and inflation but damn that's a lot of money!  It's scary to think we could need that much in 29 years.  Hopefully by then both our condo's will be paid off.  I can't imagine needing that much money.

And this is the point where I usually stick my head in the sand and pretend that what we are saving is enough.  There's no way we could achieve that level of savings.  There's a fine line between saving as much as we would need for the future and having the money to enjoy life right now.  Who knows what tomorrow will bring, we may never live to reach retirement age.  Hopefully we do.  I would love to retire with Mr. R and travel the U.S. seeing everything this country has to offer.  But ya never know, right?

Right now my savings goal for the year is to save $12,000.  We've made some great progress on that.  Who knows what the future will bring but I'm thinking once we reach our $12,000 savings goal,  our next challenge will be to find ways to increase our retirement savings and increase our mortgage payments to pay them down quicker and save on interest.

I reduced our monthly contribution on the Wells Fargo site down to $606 which is the lowest it would let me go and this is the response I got:

Reducing your initial monthly contribution amount from $1,211 (recommended plan) to $606 will require you to contribute an additional $105,216 over your lifetime to reach the same retirement goal.

I know when it comes to this type of savings, the earlier we start the better so this needs to become a priority soon.


  1. I put 10 percent on my paycheck into my 403B at work. It is about 220 every two weeks into my retirement. I also try and place cash into my savings account, which I don't touch at all. I work hard to keep my hands off this money. My employer puts 4 percent back into my 403 B. Next year, I would like to contribute 15 percent of my pay check, it depends on the state of my student loan and mortgage when 2015 begins.

    1. Wow! 15 percent is great! I couldn't imagine doing that.

  2. Every extra dollar you can put in now has more time to grow. I don't advocate deferring everything for retirement but you should try to put more in - when you are scheduled to get a raise automatically add a portion to the retirement savings. Or switch to a % saved and it will grow as your pay grow. One thing to consider - that $12K a month is a oral number - before you have paid a dime in taxes - federal/state/local. So it seems like a lot - but it isn't as much as you think. Obviously if you have a paid for house that reduces your needs but one of the big unknowns now is healthcare costs - which drives some of these calculators to give higher numbers.

    1. I didn't think about that being a before tax amount. Thanks for mentioning that. It is a little scary to think about how expensive health care will eventually be too.

  3. I take all these calculators or what financial planners tell you that you need for retirement with a grain of salt. MANY calculators work off the premise that whatever your income now, you will need 75% of that for retirement. But where you are in life(and in your earning years)isn't a 1 size fits all, is it?
    If Hubs and I "needed" 75% of his current income, that means we "need" to have an income of $90+K in retirement! Yikes!! First off, if you aren't earning money in retirement & are living off investments and savings, your tax base is way less each year.
    Second, we will have no kids here so our food/electric/etc. will be less. At that time in our lives, we won't be supporting children, paying for college, having to have 3 cars, be in as big a house/pay as much in property taxes, etc. as we do now, therefore our expenses in all categories will either go away or be less.

    Our monthly "nut"(what we need each month to pay our bills)comes out to approx. $4K a month. Imagine how much this will go down once it's just 2 people to feed, clothe, keep warm/cool, provide transportation, etc.

    The unknown is medical/long term care insurance/Medicaid costs but there is no way our lifestyle will be one that we require $90K a year($7,500 a month)in retirement. Yes, if we vacationed/traveled A LOT, bought new cars every 2 yeas, ate out every night and spent like drunken sailors when we get into our dotage, we might need this.

    And financial planners, unless they are NOT affiliated with a certain investment company are at least partially salesman who work for commissions, so they have a vested interest in YOU buying their products, investments. Of course they are going to scare you into buying more investments(stocks, bonds, insurance)telling you that you are not saving enough money, because it affects their income, right?
    Find a financial planner who isn't a salesman....one you pay by the hour for the financial advise, not one who wans to sell you something.

    Now that being said, no one who is more than 5 years or more out from retiring can't say with enough certainty what specific number they will need in retirement to cover all their bills.
    For now, if you are younger, save as much as you can as soon as you can, invest that money and let compounding work for you! After you have a pile of investing money, then start dumping more money into safer places(401ks, IRAs)over the rest of the course of your working years.
    Don't worry about hitting a specific number or retirement age, just save.
    Then when you get into your mid to late 50's, start talking/thinking about when you want to leave the working world, taking SS, and all that.

    I think as a whole these days, people in general have this fantasy mindset about retiring young. Many of these people who retire totally before 60 end up either running out of money or having to take some little job in retirement in order to remain solvent.
    You need to determine what retirement means to you, what you will DO in retirement and how long you think you will last before your health goes.
    Just MHO....

    1. Right now our expenses do include day care and 2 mortgages. A lot will obviously change by the time we are ready to retire. I'm going to try to just focus on adding more to our savings and not get too worried about the big picture down the road. It may not be the best decision financially but it's way to overwhelming to try to figure out how much we will need right now. The best I can do is save as much as I can and that will have to be good enough.

    2. I read some statistics somewhere that the average American at age 50 has saved less than $44K and the percentage of Americans who have saved nothing for retirement years is 36%.....that's 1/3 of the population with nothing for their old age.
      It went on to say that of 100 people surveyed(not a large sample on any account)who began working at 25, how many are dependent on friends, relatives, charity or SS for support is 63%.

      I figure if you are doing better than this, you are doing ok. Remember that once the kids are gone, school paid for(if you are paying it)and your home is paid for, you'll have more ammo to throw at a retirement goal. Don't despair!