I know the more you have the better off you will be just in case right? but I was reading an article not too long ago how seniors are using credit cards and pay day loans just to get by. I think that's really sad because some of them are just relying on the Social Security to pay their monthly bills. I think a good $500,000-$800,000 would be good enough to live off assuming that you have no mortagage payments (just property tax), no cc debts, no car payments, just home and vehicle insurance , utilities ,and some medical bills. Let say you retire at the age of 65 and life expectancy is about ohhh I don't know 85 yrs old. Do you think that amount will last about 20-25 yrs? maybe a little left over for your kids to enjoy?

That's a great question and one I ask myself all the time.

It depends on so many factors. One is interest rates. The stock market has made on average 12% since it's inception. Will it continue to make that much? Inflation increases by about 3% every year. Will it continue to rise that much? It's so hard to plan when nothing is for sure.

It also depends on how you want to spend your retirement years. Some people want the same income they have now so with a paid off house and kids on their own and out of college, they can travel the world. Others plan on continuing to live simply and frugally and once their kids are grown, their mortgage paid off, and they are no longer saving for retirement (because they are living in it), they will be able to live on about half of what they made before.

Here is a great calculator for figuring out how far your retirement savings will take you. It's called a RRIF which means a registered retirement income fund. Don't worry about the name. It basically means if you wanted to pay yourself all of your retirement money until you were a certain age (usually 100 - so that hopefully you'd have some left over to leave your kids if you died earlier but enough just in case you didn't). The default is 8% I like to lower it a bit just in case. I usually figure in at about 5% just to make sure. Plug in different numbers and see what your monthly income would be and then ask yourself, with a paid off house, and grown kids, will that be enough? I'm hoping to have a little more so I can take my grandkids to Disney and more!

RRIF Payment Calculator

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When I look at 500K, I see an income for 50K a year for 10 years. So that would be 25K a year for 20 years. I could not live on that now, and I don't think that removing a house payment, a car payment, and then adding in increased medical costs would make up for inflation. By the time my house is paid off, I fully expect my property taxes to have increased so much that what I am paying for now in principal & interest & taxes will probably be equal to or less than what my taxes will be in 20-30 years. So it will be just the same as having my house payment.

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... so for example using the calculator at 5% with $500,000 from the time I'm 60 to the time I'm 100, I'd have a monthly payment of $2518.73 (in today's dollars). If I had a million, my monthly payment would increase to $5037.47 in today's dollars. In reality it will most likely make more than 5%. At 8%, $500,000 would make a monthly payment of $3702.48. Eight percent is probably more reasonable.

Play around with it a bit and see what you come up with.

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It doesn't work that way though because the remainder is making interest as it sits there. Try the calculator and see the difference. The miracle of compound interest makes a HUGE difference.

Also in retirement you are usually in a lower tax bracket too.

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Everything SHE said! One payment being gone, doesn't make up for the fact that prices will continue to go up and for what it costs in medical bills to be older. You really won't be living any CHEAPER just because your house is paid and your kids are gone.
I'm hoping for at least 4 million in retirement, to be honest. Greedy as it may sound, I do NOT want to worry about money when I should be happy being retired, doing whatever I want. I do not want to work until I'm 80 just because I didn't save enough when i was young.

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Chopey

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The other factor to consider is health. I know many seniors who pay out hundreds of dollars/month for meds. Or what about long term care? Even if you purchase insurance for long term care (which you shouldn't tell you are around 60 anyway) - the insurance is expensive as well.

My grandma had alzheimers and was in a nursing home for at least 6 years. Grandpa had long term care insurance for her but that ran out before she no longer needed that particular service. So he had to "get rid of his money" b/c he had too much saved. My dh's grandpa is in a similar predicament. He has too much money for medicaid to pay for the nursing home he is currently in - so it is coming out of his investments. Dh's other grandpa had very little saved and so medicaid and medicare is paying for his nursing home.

Things to consider....

do i think you will need that much i sure do... we are on track to have more than that plus dh's pension and medical supplement from his work on top so that would help us out as well...

there are a ton of factors health inflation over time how long you continue to work most people are not retiring until into their 70's now... its not a cut and dry i will have not house payment ect the costs for everything rise each year who knows what it will be like in 30-40 more years.

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I see something entirely different. I see $100K a year forever. The goal should be to live off the interest on your retirement money, not the money itself and especially when you factor in a margin account, it should be workable. That's certainly what my grandparents do. We have consistently achieve at least a 20% return, while really minimizing risk, on the market over the last five years, even in the very turbulent current market. That being said, even people who really have a knack for the market can have down times so I personally wouldn't feel comfortable with $500K.

A lot can change in 40 yrs so I want to have a bit more then 500k. A million does not seem unreasonable. I am totally afraid of what things might cost in 40 yrs.