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Estimate Your Retirement Savings Needs

In the 1990s, there was a book titled "Your Number," and it was a popular concept that many people looking to retire still ask about. It poses the question, "How much do I need to retire?"


We have developed a simple, high-level way to see what your number might be. It is not designed to give you an exact figure and is generalized, so it's not a personalized number, but it does give you a likely ballpark to at least start the conversation with your spouse or financial advisor. However, it’s important to note that answering this question definitively is challenging due to many uncertainties—such as market fluctuations, inflation, and personal expenses—that can affect retirement savings over time.


That said, the financial industry has established widely accepted guidelines that can serve as a useful starting point, though they are not guarantees. We've created a simple calculator based on these principles to help you estimate what might be a reasonable savings target as you plan for retirement.

Result in 2nd section

This is an estimated benchmark of what you may need, based on our calculations.

Result in here:

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Here are the two common strategies we used in the calculator to give you an estimate of how much you might want to save. These strategies are frequently used by many financial advisers, investment firms, and planning tools as general guidelines. While they are not personalized—which is essential for effective planning—they offer a helpful starting point for discussions that can lead to a more customized financial plan.

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  1. 60/40 Investment Allocation

  • What it is: Investing your core retirement assets with 60% in equities (stocks) and 40% in fixed income (bonds).

  • Why it's used: This mix aims to balance growth potential with income and stability.

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​  2. The 4% Withdrawal Rule

  • What it is: Withdrawing 4% of your principal annually during retirement.

  • Why it's used: Historically, this rate increases the likelihood that your savings will last throughout your retirement years.

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By following these principles, you may reduce the risk of outliving your money if you stay within these guidelines. Keep in mind, however, that retirement planning is more complex than just these two factors. They serve as a foundation and starting point for building your plan, which should also take into account emergency savings, long-term care, legacy planning, health considerations, and other important factors.

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This is a Rule of Thumb

Calculating Your Retirement Needs

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Step 1: Determine Your Guaranteed Monthly Income

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  • Sources include: Social Security, pensions, rental income, and other guaranteed income streams.

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  • Purpose: This amount represents the base income you can rely on each month during retirement.

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Step 2: Determine Your Desired Monthly Expenses

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  • Consider: Your desired lifestyle, regular expenses, hobbies, travel plans, and any other anticipated costs.

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  • Purpose: This figure reflects how much money you'll need each month to live comfortably.

 

​Step 3: Calculate Your Monthly Shortfall

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  • How to: Subtract your guaranteed monthly income from your desired monthly expenses

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  • Example:

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  1. Desired Monthly Expenses: $6,000

  2. Guaranteed Monthly Income: $4,000

  3. Monthly Shortfall: $6,000 - $4,000 = $2,000

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​Step 4: Determine the Total Savings Needed to Cover the Shortfall

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  • Calculate Annual Shortfall: Monthly Shortfall x 12

  1. $2,000 x 12 = $24,000

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  • Apply the 4% Rule: Divide the Annual Shortfall by 0.04

$24,000 / 0.04 = $600,000

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Conclusion: You would need approximately $600,000 in your investment portfolio to generate the additional income needed during retirement.

Understanding The 4% Rule

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  • Rule of thumb: For every $100,000 invested, you can generate approximately $4000 annually.

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  • Application: This helps you estimate how much your savings can provide each year without depleting your principle too quickly.

Final Thoughts


While these calculations provide a basic estimate, it's important to recognize that retirement planning involves many variables and uncertainties:

 

  • Inflation: The rising cost of living can erode your purchasing power over time.​

  • Market Volatility: Investment returns can fluctuate, affecting your savings.

  • Unexpected Expenses: Medical emergencies or other unforeseen costs can impact your finances.

  • Lifestyle Changes: Your spending needs may change during retirement.

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Recommendation: Consult with a qualified financial advisor to create a comprehensive retirement plan tailored to your specific circumstances. They can help you account for additional factors like emergency funds, long-term care, estate planning, and health care needs.
 

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Disclosure - All written content on this site is for information purposes only. Opinions expressed herein are solely those of Core Wealth Consultants, LLC and our editorial staff. Material presented is believed to be from reliable sources, however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser prior to implementation. Core Wealth Consultants, LLC a Registered Investment Advisor in the States of Florida, Indiana and Michigan. The presence of this web site shall in no way be construed or interpreted as a solicitation to sell or offer to sell investment advisory services to any residents of any State other than the States of Florida, Indiana, Michigan or where otherwise legally permitted. Content should not be viewed as an offer to buy or sell any of the securities mentioned or as legal or tax advice. You should always consult an attorney or tax professional regarding your specific legal or tax situation. Core Wealth Consultants, LLC is not engaged in the practice of law. Hyperlinks on this website are provided as a convenience. We cannot be held responsible for information, services or products found on websites linked to ours. Diversification and asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment loss.

 

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