How much money do you have Really Need to retire without losing sleep at night? If you think your 401 (K) only cut it, think again – a bad market decision could put your whole retirement plan to sleep.
But determining the amount of money you will need to take advantage of your retirement is not exactly easy. Between health care, accommodation, grocery store and perhaps even a vacation or two, costs can be added quickly.
What about reality? Everyone's “magic number” is a little different.
If you are looking for a solid starting point, the personal financing icon Suze Orman A few rules that could help you have a good night's sleep, although its magic number can surprise you.
Orman recently shared his thoughts on her Women and money Podcast, and his advice concerns defense – especially in unpredictable markets.
His first rule: Do not count on your 401 (K) or Ira. Of course, you diligently contribute to your 1940s (K), Roth Ira or traditional Ira, but the stock market does not always play well.
“It is not always that the shares are falling and that the obligations increase, or the obligations decrease and therefore the shares increase. Sometimes everything can drop,” said Orman on the podcast.
Translation? If the whole of your retirement plan is going up in the roller coaster mountains, you could make a wild ride when you hope for a smooth navigation.
So how much money should you have on hand? To absorb the blow in a slowdown in the market, Orman recommends shaking three to five years of subsistence costs in a low -risk liquid account, such as a high -efficiency saving or a current account.
This “just in case” fund should not be linked to the market. In this way, if things go aside, you don't have to sell investments at a loss just to cover the rent or buy grocery products.
“If you really want to be safe, it's been five years,” said Orman. “If you just want to play so that you are at least three years old, okay, you can also do it. Maybe you have divided it and do four years.”
According to the Federal reserve 2022 Consumer finance survey, the average American household saved around $ 333,000 for retirement.
