Retirement Savings

Hi, this is Dave Kats with Therapist Consultants, and I have a tip for you. One of these days, you need to sit down and figure out how much you're going to need for retirement. I don't care if you're 30 years old and just getting started in practice, now is the best time to decide what you're gonna do in retirement. They say the best time to start saving for retirement was yesterday, and the second best time is today. So here's how you figure what you're gonna need for retirement if you're near retirement.

Let's say that you, your family, you and your spouse want to live on $100,000 a year. I'm just using round figures so that may be high or low for you. If you need $100,000 in retirement to live on, they say that you can live on about 90% of your normal income once you retire. So $100,000 you need right now, that means you need $90,000 when you retire.

Then you have to say, where am I going to get that $90,000 from? Well, let's say you both have Social Security. And at Social Security, maybe you both get $24,000 a year, which isn't that much. You need $2,000 a month. And so you have $48,000 together a year that you're going to get in Social Security. Of that $90,000, if you take that away, that means you only need $44,000 more. Now, where are you going to get that $40,000 from?

Maybe you have a 401k that you can take out $10,000 a month from to live on. So you take $10,000 out of that 401k. Now that 40,000 that you need gets down to 30,000 that you need. And then maybe you have some rental income and the rental income is just something small and it's $10,000 a year. Now that 30 went down to 20, but now you're out of options. Where are you gonna come up with that 20?

Well, that 20 you're going to have to come up with is from savings. Now they say that if you have something in savings and you never take out more than 7% a year, that generally speaking, you'll never run out of money because of course, you're earning money on that money. So at 7%, you need $20,000. Well, that means you would need about $300,000 in savings so that you could take out $20,000 a year to live on.

So go through it and figure here's what you're going to need, write it down, figure out what you have, what you need to live on, what we're going to live on at 90%, what Social Security is going to give to us, what we're going to have from 401k's, what we're going to give from rental properties and other things like that, and then how much we're going to have to have in savings so that we can retire in a style that we're accustomed to.

So work the plan, just sit down and work it tonight with your spouse. I think it'll be fun to look in the future. As a matter of fact, I saw an article that said people that concentrate on their retirement by doing nothing else but concentrating on their retirement generally retire with more money than people that do not. So why don't you do it tonight, sit down with your spouse, get it figured out. This is Dave Kats, thanks for listening.