When Is Enough Enough?
The amount of savings required to retire is an impossibly difficult number to determine. There are WAY too many questions…”How long will I live?”…”What kind of return will I have on my investments?”…”Will my health as I age require that I go into expensive assisted living?”
The Questions are Seemingly Endless
My original goal for leaving the professional workforce was when I turned 52. That turned out to be pretty unrealistic, so at the age of 56, I continue to work and put away money toward retirement.
In making the decision as to what amount of retirement savings will be necessary, the first step was to determine what my expected costs would be each month or year when I retired. That kind of budget is relatively simple to put together.
The easiest approach to calculating necessary retirement savings is the 4% Rule, which states that you can withdraw 4% of your portfolio in the first year, then adjust that withdrawal amount for inflation each year, without fear of running out over the course of a 30-year retirement. Over the years, I’ve used a number of on-line calculators to determine when I could retire. This web site has three of the top calculators for helping make this determination, but I still insist, determining the “correct” amount of retirement savings is not really possible.
One last component that I find confounding is how to determine what to include in retirement savings.
Do I include the value of my house if it’s paid off? Do I include social security payments in the calculation? Some of my retirement savings will be taxed when it’s withdrawn, other funds won’t…how do I estimate taxation. Can you estimate possible inheritances.
And of course, throughout all the calculations, I want to take the most promising methods that indicate I can retire earlier.
Suffice it to say, it’s definitely not easy.
I have done scant little work on my two currently active knitting projects.
With a few feet on each project still left to accomplish, the edging for the Kid Alpaca Blanket and the Ric Rac Scarf are progressing, but slowly. But I am enjoying both projects and the combination of the two very different projects makes for keeping my knitting interesting.