GREENSBORO, NC -- You've seen the commercials, everyone walking around with “their number”. It's how much they need to retire. Everyone's number is different. So, what's your number? And do you have to pay someone to find out what it is?
Getting a ballpark number is free. It all comes down to 2 equations.
Desired income – Social Security = Amount Needed Yearly From Retirement
$40,000 income - $20,000 SS = $20,000 of Retirement
Certified Financial Planner Matt Logan explains the second equation.
Withdraw rateà $ Needed From Retirement / percentage = Magic number
Example: $20,000 / .o4 = $500,000
“We have to calculate the withdraw rate. I like to use 4% or 5%. The reason you're using 4 or 5 percent is that money has to last a long time. If you took out 10% you'd run out of money long before retirement and you'd have to move in with your kids.”
You end up with the number. The magic number you need for retirement. Logan says then you need to take into consideration health insurance and your age and life expectancy. But at least this is a ballpark figure.