How much should you dedicate to a great retirement? One of the first steps in planning for retirement is understanding your goal. For some people, the goal is to have $100,000 of retirement income per year, so let’s review how that might work.
$100K To Earn In Retirement – Is It Possible? (PHOTO: GOBankingRates)
Is it Possible To Earn $100K or More in Retirement?
How much money do you want in order to retire comfortably? a $1 million? $2 million? More? Most financial planners frequently suggest replacing about 80% of your pre-retirement earnings to maintain the same lifestyle after you retire. If you makec$100,000 per year, then you will seek at least $80,000 of income in retirement. A new study from Vanguard Group, that the typical homeowner saved nearly $100,000 in 2019 by selling their primary house and moving to an area with descending home prices. In some cases, the payoff is even bigger. Vanguard used the example of an individual homeowner who bought a primary residence in Boston for $170,000 during the 1990s when she was still in her mid-30s. Today, that same home would cost around $500,000, based on the housing market today.
If the homeowner retires and sells that home today, in her mid-60s, and then purchases a smaller, less expensive home in Florida they would be able to open $200,000 of the capital gains on her Boston home. Even after taxes and other fees, they would still have a substantial amount of money to help fund their retirement. However, just remember that while this strategy works for many retirees, it doesn’t work for everyone. The amount of money you might reach in retirement from selling the house depends on numerous factors including where you reside.
Adjust For Inflation
For now, let’s presume you want to spend the whole $100k per year in retirement. The next question is when you’ll retire. If that event is several years away, it’s smart to adjust your spending goal for inflation. That way, you can resume affording the lifestyle that $100k currently affords. For instance: Assume inflation is 2.5% per year. How much will you ought in the future to preserve the same purchasing power?
- 10 years away from retirement: Plan for earnings starting at $128,008 annually.
- 5 years away from retirement: Plan for earnings starting at $113,141 annually.
A “future value” calculation can support you figure out precisely how much to target in your first year of retirement. The tool below can support you calculate your numbers.
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