This calculation can help you determine how much money you will need to live in retirement.
Think of those days when you can sleep in and spend the day doing whatever you want. To get there you need to plan how much money you’ll need to live on when you retire.
Your calculation will go like this (we’ve factored in a Consumer Price Index inflation rate of 2.22% per year, which has been the average rate of inflation in the 10 years from 2005 to 2015): Your estimated annual income at the time you retire–$________ x 1.022 (inflation factor) = what you’ll need to maintain your current lifestyle.
This shows how much you’ll need as you enter your first year of retirement. Multiply that result by the same formula to see how much you’ll need in your second year. Repeat this 15 or 20 times to see what inflation will do to your dollars over the years. The total of all those calculations–year one + year two + year three, and so on–is how much money you’ll need for retirement.
For example, if your income at retirement is $50,000 per year, you’ll need $51,100 to produce the same buying power in your first year of retirement. In year five, you’ll need $55,747; in year 10, you’ll need $62,155; in year 15, you’ll need $69,300; and in year 20 you’ll need $77,265. Over a 15-year retirement, you’ll need $896,569 in income. Over a 20-year retirement, you’ll need $1.27 million. That’s a lot of money, but we can help you get there. Talk to an IRA specialists from GNO FCU today for information about your retirement saving options.