how much do i need to retire early

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					Choose Your Future
How much will you
really need to retire?
                                                                        Today                                        Factors to Consider
                                                                                                                     n If you plan to retire early, you’ll need to save

                                                                                                                        even more aggressively.
       o you know how much you’ll need                    Do the Math…
       to have saved up to retire comfort-                Jennifer is 30 years old, making $40,000                   n If you plan to travel or live more lavishly in
ably? It’s probably more than you think!                                                                                retirement, you’ll need to save more.
                                                          per year. If she assumes she’ll average
Retirement experts estimate that you’ll                   a 3% pay raise each year, and wants to                     n Your money needs to last – most people live
need to have saved about 15 to 20 times                   retire when she’s 65, she’ll need about                       about 20 to 25 years after retiring.
your annual pay in the year before retire-                $2 million to retire and maintain her                      n Health care costs not covered by Medicare
ment (also called your “final annual pay”)                standard of living. Use the chart below to                    are significant and growing rapidly.
to maintain your pre-retirement standard                  figure out your “magic number.”
of living.                                                                                                           n Social Security was only meant to replace
                                                                                                                        about 1/3 of your pre-retirement income.
                                                          Why do you need so much?
                                                                                                                     n “Winning the lottery” is not a realistic
                                                          Even if you want to, you probably                             retirement plan. Face it – you need to save!
                                                          can’t work forever. There are many
                                                          reasons you might not be able to continue
                                                          working. For example, one in ten people                    You’ll probably live a long time
                                                          over the age of 65 are unable to work due                  in retirement. You will need to have
                                                          to a chronic disability.1                                  enough money to support yourself for at
                                                          Money provides security. Food,                             least twenty years after you stop receiv-
                                                          clothing, housing and medical care all                     ing a paycheck. Also, the last three to
                                                          cost money. You may have other family                      five years of your life can be the most
                                                          members relying on your income, and                        expensive – you may need nursing home
                                                          you may also need to pay someone to                        and/or increased medical care. Medical
                                                          care for you when you are no longer able                   costs continue to climb: a person retiring
                                                          to care for yourself.                                      in 2040 would need $245,767 (single)
                                                                                                                     and $291,532 (couple) for their health
                                                                                                                     care costs alone.2
                                                                                                                     Money provides choices. Whether
                                                                                                                     you plan to travel the world, spend time
                                                                                                                     with far-away family members or stay
                                       Jennifer           YOU                 Years to
                                                                                                                     home to pursue hobbies or volunteer work,
                          Age             30                                      5          1.13
                                                                                                                     your savings influence your options.
               Current Pay                                                       10          1.30
                      times            $40,000
             Pay multiplier
                                        x 2.73                                   15          1.51                    The Bottom Line
                Equals final
                                                                                 20          1.75                    If you plan to simplify your standard of
                                     = $109,200
                annual pay                                                       25          2.03                    living, retire later than age 65, and will
                                   = Retirement savings needed                   30          2.36                    have a good post-retiree health care plan
                   Final pay                                                     35          2.73                    to supplement Medicare, you may be able
                                    = $1,638,000
                  times 15 +                                                     40          3.17
                                                                                                                     to get away with saving less. However,
                   Final pay                                                     45          3.67
                                                                                                                     the more you have saved, the more com-
                  times 20 +
                                                                                                                     fortable you’ll be when you retire.
She already has about $30,000 in her 401(k) plan, and saves 12% of her pay. If she keeps
up that pace, and gets an average rate of return of 8% on her investments, she’ll have
saved $2,046,000 by the time she’s 65.
1 Source: US Department of Health & Human Services
2 Source: Center for Retirement Risk at Boston College

While this newsletter and TRI-AD’s Web site can give you some tools to help you make investment decisions, you should consult a financial planner for more detailed guidance.

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