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How To Get To The Retirement I Want
Photo by Mike Tanase from Pexels
Note: You can use any financial calculator to do this problem, but if you want the BEST, you can
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Last time, I talked about how I determined how much money I think I'll need in my retirement account
when I retire. This time, we'll figure out how to get there with monthly contributions and account appreciation (i.e. the money in the account making more money).
If I plan to retire in 25 years, and I've got nothing saved so far, I still have time, but it won't be as easy as if I'd been saving before now. Let's assume that my account will grow at 8.5% annually, and that I'm going to contribute the same amount every month to the account. At the end, I need the account to have $2.3 million in it. How much do I need to contribute every month? Assume monthly compounding.
This one is pretty straightforward.
First things first, make sure the calculator is using 12 Payments per Year.
N: 300 (I'm going to retire in 25 years, which is 25 x 12 = 300 months)
I/YR: 8.5 (My account will grow at a rate of 8.5% per year)
PV: 0 (I've got nothing today, I'm just starting out)
PMT: (This is what I'm trying to find)
FV: 2,300,000 (I want to have $2.3 million at the end)
To achieve my retirement goals, I'll need to save $2,233.03 per month until I retire.
That... that's actually quite a lot. More than I was expecting, in fact, especially given that my monthly living expenses are about $6,500 per month. If I were truly starting from zero today, this would be a pretty daunting challenge. But knowing what you have to do is the first step to making a plan and achieving your goal. So it's better to know than to just ignore the problem and hope for the best.
What do you think? Do you know your numbers? And do you know how you can get to retirement with everything you'll need? If you have a plan in place, how's it going? If not, why not take this opportunity to put one together? Let us know in the comments!