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How Much Do You Need in your Retirement Fund?

money planning for retirement

The most common goal in retirement is to be able to live off investment income free of the stress of financial uncertainty. However, there is no one-size-fits-all financial plan that works for everybody.

Some rules of thumb can provide you with guidance. The key to every retirement plan is working with a financial professional and starting your planning as early as possible.

Factors to Consider

The amount of money you need for retirement is dependent on the age you plan to retire; 65, 60, 55, or even 50. Another key factor is your life expectancy which could extend into your 90s, dependent on your health. Therefore, you could be relying on your retirement income from 25 to more than 40 years.

Other considerations include lifestyle goals such as place of residence, living expenses, travel plans, hobbies, spending habits, and financial obligations, including debts.

It is important to establish a retirement budget before you retire that considers all the above factors.

Part of any financial plan is an emergency fund which you should continue to maintain through your retirement and keep separate from your retirement fund. It should cover at least 3 to 6 months of living expenses in the case of an unforeseen emergency.

Some Rules of Thumb

No rule applies to every individual. But some long-applied rules can provide guidance for retirement savings goals.

The 4% Rule

Divide your desired retirement income by 4% to determine your required savings for retirement. If your target is $80,000 then ($80,000/0.04) requires savings of $2 million. This calculation assumes a 5% total return on investments after taxes and inflation.

Retirement Savings by Age

To stay on track to maintain the same standard of living as your employment years there is a simplistic savings target. This is typically stated as saving 1 X salary by age 30, 3 X salary by age 40, 6 X salary by age 50, 8 X salary by age 60, and 10 X salary by age 65.

This assumes beginning at age 25 and saving at least 15% of gross salary and includes investment in all available government tax savings plans and employer-provided pension plans.

These are only general rules of thumb. They do not account for lifelong investment return variances and your own retirement goals. That is why it is important to work with a financial professional to create a personal financial plan that encompasses your retirement goals.

If you have not started already, then start your retirement plan as soon as possible.

Planning Ahead is Key

Planning ahead and focusing on good long-term investments will increase your likelihood of having enough money to enjoy a comfortable retirement.

Ideally, retiring with a dividend-paying portfolio providing sufficient income to meet all your financial needs without encroaching on the principal should ensure your financial stability through all your retirement years.

Investing in Your Retirement with Bloom Investment Counsel, Inc.

Living on dividend income in retirement is a dream shared by many investors. If this is your goal, contact us today  at 416-861-9941 or email us at to learn more about how we can help your achieve this goal.

Bloom Investment Counsel, Inc. has nearly four decades of experience providing actively managed, customized dividend-paying portfolios for wealthy individuals, family offices, foundations, corporations, institutions, and trusts.

We offer a hands-on personalized investment management service where we construct and manage your investment portfolio for you based on your unique long-term financial needs, objectives, and goals, as well as preferences and constraints on your invested capital.

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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.

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