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I've posted a ton on retirement including how to retire early whether a million dollars ours is too little to retire or not and how three million dollars is not enough to retire but those posts tend to be how to's with general suggestions today. I'd like to get more specific and provide a roadmap for those wondering if they can retire or not a way for them to calculate their numbers and see where they stand so with that. Let's begin detailing the three steps to determining if you have enough to retire. Step one estimate your retirement expenses this step sets the baseline for what you'll have to overcome to retire if you've had a budget throughout the years and or attract your spending in any way estimating your retirement expenses will be easy. You probably already have a good sense of what things cost. And may have years of exact spending data to us in setting retirement costs. We have over twenty years of spending saved in quicken so this was a breeze for us. If you don't have any historical oracle results you'll need to get some eventually so set up a system like quicken mint et Cetera to track spending and get some actual data until then you can estimate by looking at past Checkbook Checkbook Bank and credit card statements simply list. What you plan to spend by category food clothing home entertainment etc over? The first three years of retirement beyond three years is difficult. Estimate you can do this by year. Quarter or month and use whatever format works for you paper spreadsheet computer program at Cetera. We use a spreadsheet enlist costs by category and by month then at the end of each month I save a new copy of the previous month. Sheet Lop off the month that has passed and set that new projections based on more current Info. This gives me a completely up-to-date budget every month and allows me to make adjustments where needed easy peasy doing this. You'll get an annual annual spending number. This will be your retirement. Target step to determine how much retirement income you can generate calculating retirement income can be difficult since there are so many variables that go into it. L. Focus on the basics that likely applied to most people these are one total assets less any debt on them. Obviously obviously the higher this number the better to the amount of income these assets can generate or said another way the income generating return rate on these assets. Three whether or not you want to draw down your assets in retirement for example using the four percent rule. We've discussed here quite a bit. Seem I post how to retire on a million dollars dollars or less if you want more specifics and for extra income from a side hustle. Once you know these you can get a decent projection of retirement income. I'll run through a few you examples to show what I mean. High income generating assets. Let's begin with Bob and Sally who have the following finances two million dollars in assets. It's half in real estate and half index funds. The real estate earns eight percent in income per year while the index funds are in one point five percent in dividends. Here's what Bob and sally could earn and retirement. If they didn't want to draw down their assets they would earn ninety five thousand dollars per year. That's eight percent on the one million in real estate and one point five percent on the one million in index funds. If they did want to draw down their assets they would earn one hundred twenty thousand dollars per year eight percent on the one million in real estate and four percent withdrawal on a million in index funds. Not Bad right. They have a good amount of assets and a good return rate especially on the real estate which allows them a healthy retirement income come lower assets and lower returns now. Let's look at Ben. Ensues financial setup one point five million dollars in assets all in index funds the index funds. Earn one point five percent dividends. Here's what Ben and Sue could earn retirement. If they didn't WANNA draw down their assets they would earn twenty two thousand five five hundred dollars per year. That's one point. Five percent on one point. Five million in index funds. If they did want to draw down their assets they would earn sixty thousand per year four percent percent withdrawal on the one point five million in index funds. Their assets are lower. And they don't have any that generate high return rates so their income is much lower than in the first example the low assets and low returns. Now let's look at what Bert and Sarah have available. Seven hundred fifty thousand dollars in assets all in index funds the index funds are in one point five percent in dividends. Here's what Bert and Sarah could earn an retirement. If they didn't want to draw down their assets they would earn eleven thousand two hundred fifty dollars per year one point five percent on seven hundred fifty K. and index sons if they did want to draw down their assets they would earn thirty thousand dollars per year four percent withdrawal on seven hundred fifty K.. In index funds fewer assets and lower returns equal lower retirement income low assets low returns and a side hustle. Now let's see how things change if you add in a side hustle so same example as the last one bird and Sarah have available seven hundred fifty thousand dollars. In assets assets all in index funds the index funds earn one point five percent in dividends. Only this time they also have a side Hustle that earns them twenty thousand dollars a year. Here's here's what Bert and Sarah could earn and retirement. If they didn't want to draw down their assets they would earn thirty one thousand two hundred fifty dollars per year one point five.

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