How Much is Enough to Retire?

This is probably the toughest question you will ask yourself as you plan your retirement. Many people have made a small fortune telling you how to calculate your “magic number”. But is there such a thing?

I have just reviewed an Booklet by Todd Tresidder entitles, “How Much is Enough to Retire?” It’s one of those titles that will immediately grab your attention if like me you are transitioning to retirement.How Much Do You Need to Retire? (Better late than never)

Read my post on Todd and a Financial Coach earlier this year.

So how does Todd answer this burning question?

His booklet puts that question front and centre on the introduction and answers it.

“There is no single number that definitively answers the question, “How much do I need to retire?”.

He goes on to say the reasons are because,

“…, the calculations are only as accurate as the assumptions behind them.

It doesn’t matter if you use the latest, sophisticated Monte Carlo calculators or any of the older, simpler models…”

It’s all about the assumptions you make (or the calculators make on your behalf -my words) that will determine how accurate the calculations are.”

Todd claims the calculator used is almost irrelevant when compared to the assumptions you make.

He goes on to say that it is almost impossible to predict an outcome 20-50 years into the future. My only comment here is many Baby Boomers are trying to do this calculation right now and are either in retirement or close to it.

Since my blog is concerned with Baby Boomers in retirement or about to retire I reviewed this eBooklet from that point of view.

I concede the process of calculating your retirement number is the same though. As a retiree or an imminent one you still have to make assumptions.  These assumptions may in fact be more accurate because they are current or just a few short years out.

However many Baby Boomers have a nest egg that is seriously depleted after the financial melt-down. That is even more of a reason to work out how much you need to retire. It’s no use just sitting and hoping all the losses will come rolling back. If they do – great, if they don’t – you are in trouble.

Todd’s Booklet will certainly help you focus on the questions you need to ask yourself and the assumptions you need to make in order to work out a range of retirement scenarios. That’s right. Whilst there is no “Magic Number” you can still work through a range of scenarios from worse case to best case.

That at least according to Todd will give you a retirement goal. And as I said even if you are in or about to retire you need to do this exercise, especially if you retirement nest egg has taken a serious hit.

Todd’s eBooklet will help you do this through a series of 6 essential questions he says you should ask yourself to help you determine your retirement goal. I’d call these the six magic questions on retirement.

Just those six questions alone will help you focus on what you need to do to hopefully retire comfortably. But it is not easy because five of them don’t have definitive answers – you have to make assumptions.

For instance you do not know the date of your own death? Well maybe you will with the new universal healthcare – sorry a cheap shot 🙁

“How Much Is Enough to Retire?” will help you work through these questions, so that at the end you will have a range of outcomes that Todd calls “a reasonable confidence interval” for your retirement nest egg savings.

In fact Todd goes into considerable detail about how you should answer these questions and how to make the assumptions you need to make. He then goes on to show you how to build your Personal Confidence Interval based on your personal assumptions.

He emphasises in several places throughout the eBooklet that,

The Key to How Much You Need to Retire is The Assumptions You Use – Not the Model

So the focus should be on the assumptions and Todd includes a chapter on how to do just that to plan your retirement.

This eBooklet is a great little book to get you on the right track for your retirement goal. It’s concise and to-the-point. It can be read in about an hour and is an easy read – no high level maths.

So I do recommend you go over to Todd’s web site, Financial Mentor and purchase it. Also take a good look around his web site. There are some really great articles covering a range of financial topics to do with retirement.

One last thing. Todd has his own Retirement Calculator on the website which is free for you to use. After reading his eBooklet you should try the calculator.

2 Responses to “How Much is Enough to Retire?”

  1. Why do you only talk about retiring in America ?

    Why don’t you consider retiring in Bulgaria?

    There are many reasons for this and the first consideration is a very low cost of living: Bulgaria is known to have the lowest cost of living almost anywhere in Europe.

    British people moving to Bulgaria report that they feel much happier and safer on the streets than they did at home. Many Brits have come to Bulgaria for the summer and end up staying for much longer.

  2. admin says:

    Thank you for your comment.
    The aim of this blog is primarily to let baby boomers know what can destroy their retirement nest egg if they are not careful. I really don’t know enough about retiring in other countries to comment.
    However I do have a personal view on such retirement.
    If you are independently wealthy then you can choose where to retire. If you rely on government social security and pensions then your long term security is best maintained by being in your own country. There you know the health system, the law and you most likely have relatives and life-long friends who can help as you age.
    By all means rent/invest in a holiday home in another country and even stay there for extended periods of time if you can afford it. But to my mind I would not purchase a house in another country unless I had capital to spare and was able to return to my own country should I need to for health reasons as I age.
    I’m sure Bulgaria is beautiful and the low cost of living is definitely attractive.
    Ex-Pat people from the UK who sold up and moved to Spain but relied on the British pension found out during the recent credit crisis how the exchange rate crippled their lifestyle and forced many to go back home to the UK leaving their Spanish home unsold.

    Going to Bulgaria for the summer and staying much longer is a great idea and should be encouraged, but it should only be as an extended holiday for those people relying on UK pensions, health care and retirement funds.

    Regards,

    David Bates

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