When you can retire is more dependent on how much you’re spending than how much you’re earning. Here’s why:
With interest rates low and people living longer, the correct rule of thumb says you’ll need to save 33x the amount you spend annually to reduce the risk of running out of money.
First figure out your monthly expenses. For example, if they run $10,000-$15,000 a month, that’s $120,000 - $180,000 a year you’ll need to fund in retirement. However, you may live in a part of the country where the cost of living is much higher.
A married couple (both collecting their maximum Social Security benefit) will collect about $30,000 each annually. That leaves them a gap of $60,000 to $120,000 annually to cover from other sources.
With interest rates and people expected to live longer, the correct rule of thumb says you need to save 33x that amount (that’s $2 million-$4 million) to reduce the risk of running out of money.
Don’t panic. Instead, take these three steps now to avoid being forced into difficult decisions later.