Retirement: Several Years Away
Retirement: Several Years Away

As you prepare to retire, the biggest questions many people have are:

  • How much money will I need to retire?
  • When will I be able to retire?
  • What do I need to do now in order to be able to retire?
  • How can I retire early?
  • How will x (where x equals any life or work decision you are currently considering) affect my ability to retire?
  • How should I invest today in order to be able to retire comfortably tomorrow?

While many people find working with a financial planner the best way to answer these questions, there are a couple of rules of thumb you can use to begin to estimate both how much you’ll need and how much you’ll have.

The 300-to-1 Rule

When asked how much money we’ll need in retirement, most of us will respond with a monthly figure. The 300-to-1 Rule tells us how much we’ll need to have saved in order to produce $1,000 of monthly income. The rule is this:  For every $1,000 of monthly income you need after social security, pensions, or other sources of monthly income, you’ll need to have saved $300,000 worth of savings or investments.  In other words, if you need your investment portfolio to generate $3,000 per month, then you’ll need to have accumulated $900,000 ($300,000 x 3) in your retirement nest egg.  If you need $4,000 per month, then you’ll need to have saved $1,200,000 ($300,000 x 4).  This is based on a generally accepted 4% withdrawal rate. If you have $300,000 worth of savings and withdraw 4%, that would equate to $12,000 per year or $1,000 per month.  While there is no guarantee, most financial planners believe this to be a generally sustainable withdrawal rate.

The Rule of 72

So how are you going to accumulate $900,000 or more?  A lot of it will depend on how you invest your money. The Rule of 72 tells us how long it will take an investment to double in value at different interest rates. To calculate, take the interest rate you are receiving and divide it into 72.  The result is the number of years it will take for the investment to double in value. For example, if you are receiving a 4% return, it will take 18 years to turn $1,000 into $2,000.  If you are receiving 8%, it will take 9 years.  As you can see below, over time, the rate of return you receive on your investment can make a big difference as to how much you’ll have in the future.

Rule of 72 - The Impact of Investment Returns
Two Investors, Both Age 30, Starting with $10,000

Age 30 39 48 57 66
Investor A (4%) $10,000 - $20,000 - $40,000
Investor B (8%) $10,000 $20,000 $40,000 $80,000 $160,000


While fixed-rate investments such as savings and CD’s are often suitable for shorter-term investments, variable-rate investments which do include some risk to principal but also offer the potential for higher returns, can often be suitable for longer-term investment needs, such as planning for retirement.

To find out if you’re on track for retirement or to estimate how much income you can expect at retirement, check out our Retirement Planning or Retirement Income Calculators, or complete the form on this page to schedule an appointment with one of our advisors.

The information presented here is for educational purposes only and should not be considered financial, tax or investment advice. Please consult a qualified professional.

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