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How Much Do You Really Need to Retire?


Think, plan, and plan some more.

If your reaction to your last 401(k) statement was, "I'm never going to be able to save enough to retire, so why bother," you're not the only one having trouble coping with the idea of how much you'll need to retire.

"The freakout factor is big," says Galia Gichon, founder of Down-to-Earth Finance, an independent finance education company in Manhattan that counsels clients on how to spend smarter.

"I have clients who come up with a number, then see how much they have, and are so scared of how much more they think they need to add to the account, that they do nothing," says Gichon. "And that's not a good response."

If you need to get your head out of the sand about your retirement-fund balance and need to take control of the situation, it's best to start thinking about what you can do -- as opposed to what you can't do, counsels Heidi Malone, a certified financial planner with USAA in San Antonio, Texas.

"How much do you really need? It's a very personal question," Malone says. "The number you come up with could be very different than someone else's number, so it's not a good idea to be comparing what someone else says they need to what you need. This is something you need to work out yourself, or with a financial adviser."

Factors that need to be considered include first determining what you expect your lifestyle to be in retirement. Do you want to maintain your current lifestyle, or are there places where you can cut expenses? If you are planning to retire, or at least leave your full-time job, do you have a target date?

Next, says Malone, figure out all the sources of income you will have in retirement. These will include any pensions you are eligible for, social security income, retirement funds, and other investment income.

Calculators are available online, such as the Retirement Savings Calculator from, and another from, which will help you determine how much money you'll have when you retire.

One thing to keep in mind, says Malone, is that the amount of money you have in your retirement fund is money that's supposed to last for the next 20 to 30 years.

A good rule of thumb is that you'll begin withdrawing 4% of that money each year. "But keep in mind," she adds, "The money that remains in the account will continue to grow."
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