How Much Money Do I Need to Retire?

by James Austin


How Much Money Do I Need to Stop Working?

Short answer - Use our easy to use retirement calculator here


What is financial independence, or financial freedom?

Definition: “Financial independence is the status of having enough income or wealth sufficient to pay one’s living expenses for the rest of one’s life without having to be employed or dependent on others.”

Most people are too busy with their day to day lives — work, kids, paying bills — that they never look up, or ‘zoom out’ to see the bigger picture.

The notion of working in a single job/career for 40 years, then retiring on a guaranteed pension, is now as antiquated and outdated as the typewriter.

The main problem is that although retirement (what we prefer to call financial independence) is important, it’s not urgent. The fact that it’s ‘so far in the future’ fools people into a false sense of security.

Maybe you won’t reach your financial targets, but you can always drive a taxi or work in a supermarket, right? WRONG. Automated vehicles, automated check-outs — in short, automation — is fast eating up all of those jobs.

It’s ok, the government will take care of me. Really? When social security schemes were set up following the Second World War, there was on average 7 people working to every 1 in retirement. Its now down to a European average of 2.5-1, and UN estimates are that by the 2040s it will be 1–1. People are living longer, and they form a larger part of the voting population every year. Just look at the pushback against pension reforms across Europe.

Maybe instead you can move to a cheaper country? Sure, but what about the language, and where are your friends, family and grandkids?

Instead, you need to TAKE OWNERSHIP of your own future today. Ask yourself a series of questions;

1. If I stopped working today, which country would I be based in for tax purposes? (183 days minimum)

2. How much would I need every month (or year) to live comfortably/cover my bills? (rent/mortgage, utilities, food, car, insurance, social life, travel, hobbies)

3. What is the tax rate I can expect to pay, in order to get this annual amount after income tax?

4. What age would I like to be financially independent/retire? 

5. What is the average long-term inflation rate of the country?

6. Now we have the future value of the annual income you’d need; how do we produce this every year? From the (relatively) safe assets that produce income (pensions, property, dividends investments), what is a safe rate of return? 4%? 5%?

7. Take the future annual income you need, and divide by 4% or 5%

8. This number is the amount that you need to become financially independent. 

This is YOUR NUMBER.

Too much work? 

Use our easy to use retirement calculator here. 

It only takes 2 minutes!

NEXT STEP

  • Calculate how much you will have in the future, by adding up your current savings and extrapolating over time
  • Are you on target, over target, or under?
  • By which age will you reach financial independence (if ever)?
  • On target or over? Great, but you’re not there today, and tomorrow’s not promised. Better to get ahead of target earlier, if you can.

OR

Simply outsource and delegate all this work to an experienced, qualified, expert!

If you don’t do all of your own car maintenance, your own building work, or cut your own hair, then you’ll appreciate the insight and skill of a professional in your financial planning.

Use our easy to use retirement calculator here then get in contact for a free initial exploratory call.

Disclosure:

This article has not been written to give advice, and purely expresses our own opinions. We are not receiving any compensation for it, and we are not responsible or liable in our capacity as an independent financial adviser for any action taken by readers based on these opinions. For personalised advice based on these issues, please seek advice from a regulated, independent expert.