newarenanow wrote:I'm 34 and would like to retire by 62 or so. How much money do I need to retire if I plan on having my house paid off and just want to do some casual travel and live a reasonable lifestyle (maybe $50-60K in todays dollars) to retire?
How much should I have right now?
Does anyone have any of those calculators or a good site to point me to?
You should be able to find more, but just to start your thinking:
Financial planners typically consider the "4% rule" to be reasonably conservative (if you follow it, you are reasonably unlikely to run out of money anytime during the 30 years following the retirement). The 4% rule says that you take 4% of the value of your retirement portfolio during the first year after you retire, and you keep on drawing that amount of money, raised by the level of inflation during the subsequent years. So, if you save, say, $1,000,000, you will be living on $40,000 (+inflation) during your retirement years. Naturally, those will be $40,000 in the dollars of your first retirement year, so roughly $40,000/(1+i)^t in todays dollars, where i=expected average annual inflation, and t=number of years until you retire.
In terms of "how to get there": Once you determine your Target Retirement level (TARGET), then solve for C (the necessary first year's contribution) in the formula:
C * [(1+r)^t - (1+g)^t]/(r-g) = TARGET - PV*(1+r)^t
where r = expected rate of return on your investment per year (for stocks, think r=10%; for bonds, r=5+%, so maybe pick something in between)
g= expected growth of your annual retirement contributions (that is, if you contribute C in year 1, you put in C*(1+g) in year 2, c*(1+g)^2 in year 3...)
PV = the value of your retirement portfolio now
(or, to put it intuitively: the future value of the growing annuity of your contributions has to reach the TARGET, lowered by the future value of your current retirement portfolio)
Naturally, the above assumes that TARGET is what you expect to have above and beyond your social security and other pensions.