One of the biggest ways that we prevent wealth is written in Chapter 15, We Don’t Understand the Importance of Retirement Savings. We should know how much we should save so we’ll have the ability to live the comfortable retirement that we both desire and need. The only way we can possibly know this, however, is to find out our wealth number, and then ensure that we are appropriately saving the minimum required to reach it.
We are not truly “retired” until we have enough monthly income to cover all of our liabilities and discretionary spending, up until the time that we estimate we’ll live. If true retirement is what we seek, it is of the utmost importance that we know our wealth number.
How big of a wealth number do we need?
Will a wealth number of $500,000 be enough to provide the monthly income stream we need? How about $1,000,000?
The importance here is that there is no “one-wealth-number-fits-all” solution. Why?
- Some of us may need more than others: A person who “retires” with a mortgage payment of $1,500 will surely need more than a person who does not have a mortgage payment, assuming all other expenses are equal.
- Everyone does not desire to retire at the same age: Some people may only need a monthly retirement income stream for 20 years, while others may need a stream for 30 years.
Are you currently saving “too much” towards your wealth number?
There is a such thing as saving too much, if you are miserably forgoing other things that you desire to do. So, how do you know if you are saving too much towards retirement, and that you are not taking away from other opportunities to save or spend?
Do you really need to arbitrarily max out both your 401(k) and Roth IRAs? What can you do with an extra $7,500 a year if you determine that you only need to save $10,000 a year to get to your wealth number? Can you use the extra money to fund a college savings account? An emergency fund? Pay off debts? Hence, we should all take the Wealth Number Challenge to be sure that we are on target for retirement without delaying our self of present day pleasures.
Take the Wealth Number Challenge
Challenge everyone to determine their wealth number by using the simple process described below.
1. Determine both your anticipated retirement monthly expenses and discretionary spending needs.
2. Use the link below to Bankrate’s Retirement Income Calculator to determine what your estimated wealth number should be, based on these needs.
Your Wealth Number!
3. Interpret the numbers.
If your anticipated monthly expenses in retirement is $6,600, and you need this amount for 30 years, then your wealth number is $3,164,128 if you have the same life parameters as the person above!
4. Join the wealth number challenge by doing one or all of the following:
- Blog about your wealth number, and whether or not it is achievable for you. This is an easy way to hold yourself accountable to your readers; they may also give insightful feedback.
- Place the “Wealth Number” banner on your blog to encourage others to take the challenge.
- Simply provide a comment below about your wealth number.
- Tweet something similar to the following:
Do you know your #wealthnumber? Mine is $XXX at age XX. Find yours: http://bit.ly/ONYay8
5. If you blog about your wealth number, send me the link to your site in the comment section below so I can add you to the “Wealth Number” blog roll.
If this Wealth Number Challenge makes you think critically about your finances, I also recommend the book, How We Prevent Wealth: A Personal Finance Reflection, where the challenge was derived:
I’ll be writing a blog post about this topic after recently writing a post on How Much Savings Is Too Much?
If we don’t know our goals, then we lose the purpose of savings.
Sam
Yep, it’s easy to arbritrarily save for a arbritrary goal.
I love it Romeo! What a great idea, I bet your Wealth Number Challenge will open a lot of people’s eyes about how much money they’ll need to retire!
Dorethia, it certainly opened my eyes. I thought I would be able to retire much earlier than 60 years old, until my number told me otherwise.
I agree, if you don’t know where you are going, how will you know you are there?
I’m making good progress on my retirement goals but still feel like I could be saving more, especially if I start a family in the coming years. The cost of kids is quite intimidating!
Children are expensive. Parents want the best for their children and most often spare no expense to obtain it. Thanks for taking the challenge!
My wealth number is around $850,000 at the age of 60. I’ve got a tiny pension and social security of about $1,300 a month to hold me through. I’m 50 years old and have about $720,000 in wealth. I think I will get there!
J
Awesome!
I sent a tweet on my wealth number for the challenge. I need 1.9 million to get a monthly income of 5070 after taxes.
http://www.moneywatch101.com/
Great Challenge. We are in. At one point I knew what the number was but that was when I was employed full time with a 401k, etc. Now that I am self employed, my standard of living has changed, what is important to me has changed. So, what my wealth number was 10 years ago is totally different now.
Hi, Andrea! What matters is that you know your number now and adjust your finances to get close to where you want to be. Thanks for stopping by!
I’m 38 have 12 years to go before I plan to retire at 50. My wealth number is $1,200,000 with a $3,800 a month after tax income.
Live in California!
My husband and I are on track to retire with $3300/month at age 60. I am a stay-at-home mom, so we only have his retirement to count on. This amount is enough for us, but we would really like to change his retirement to retire much earlier. I am amazed that even though we are doing everything right- contributing a lot of money and maximizing his 401k and our IRA’s, that it isn’t as much as I thought. Just goes to show how important it is to start saving early and start saving more than we think we need to save!
Thank you for this tool and for creating this challenge- it’s fantastic!
Hello! I’m glad you enjoyed the challenge. It is amazing the eyes that it opens when one really begins to see what is needed to save towards a health retirement.