Good Grief: Advise, please.

[KV007]

While I have some retirement savings, I've never seriously considered how much I should be setting aside for retirement or even how much I will need to retire. How do I even figure out that magic number? After reading the posts here and with my 35th birthday around the corner, I am suddenly concerned. Any advise about where I'm at or how far I need to go would be appreciated. Here is the current state of affairs...

I am single and make $60K/yr ($3,700/mo net). My living expenses are approx. $1,600/mo. I contribute 4% ($2,400/yr) to my company sponsored 401(k), which is matched 100%. The 401(k) is a new company benefit, and my account so far only has about $9,000 which is invested in an Oppenheimer Fund.

I have two IRA's: T. Rowe Price ($16,000) and Neuberger & Berman ($22,000). I will open a Roth IRA but am not sure if I should roll over the money in the regular IRA's or leave it alone.

I also have $125,000 in other investments not designated for retirement. Just how far behind the 8 ball am I?

[W2R]

First, you need to decide how much income you will need in retirement. This requires more thought than one might expect. You may need much less than you need now, for various reasons (such as a paid off house, kids grown and gone, no more need to contribute to your 401K, or whatever).

Then, multiply the annual income you will need by 25, for a rough estimate of the size of nestegg you would need to produce that income. For a more in-depth analysis, try the Firecalc calculator at FIRECalc: A different kind of retirement calculator

Hope this helps! And welcome to the ER Forum.

[CuppaJoe]

Welcome, KV007, you're way ahead of my thinking when I was 35. Then I just saved whatever I could with no thought to the details.

As for advice, all I can say is, good grief, Charlie Brown, Lucy will always pull the football away.

[kyounge1956]

Hi KV007,
the Fall 2008 Retirement Planning issue of Kiplinger's Personal Finance Magazine has a worksheet in it to help you make a rough calculation of how much you will need to have saved in order to retire, and how much you need to be setting aside monthly to get there. It's supposed to be on newsstands until Sept 30, or your library may have a copy.

[militaryman]

You don't mention housing ... are you renting now or do you have equity in a home?

Entering retirement with a paid for residence and health benefits are two of the biggest considerations. Where are you on those two?

[donheff]

Want2Retire gave you the ballpark "number" most people toss around. But a lot of thought goes into fine tuning it. That 25x is based on a broadly diversified portfolio with low expenses. And there is a fair amount of wailing and gnashing of teeth about whether it is too low or too high. Nevertheless it is a good ball park figure to aim for. The "necessary income" figure is much harder to arrive at. Toss out the 80% of current income figures that are bandied about in the press - they are total nonsense. What you are actually shooting for is an estimate of your expenses during retirement. But your expenses will probably be drastically different than they are now. You need to look at your life situation. Are you paying a mortgage, raising kids, saving? If you get serious about saving now, you can anticipate dropping the cost or a mortgage, the savings, and possibly the tuition costs (depending on how early you retire). You can also anticipate dropping social security taxes (at some point) and falling into a lower income tax bracket - but don't forget estimating what those taxes will be. Finally, you can safely assume that you will have some social security income coming in at age 65 or so. If you want to be conservative, estimate it at 70 - 75% of the current rates. Or just ignore it and you will insure that you save plenty (and retire later). Medical expenses are a bit of a mystery. If we don't have some sort of universal health care system by the time you retire I will despair at my fellow Americans - but hey, who knows. You should toss in a hefty monthly amount to cover some sort of policy - health care isn't free no matter how the system is structured. If you look at current actual spending, anticipate likely changes you will make you can get a decent idea of what to expect. Then keep updating your plan to adjust to reality.

[freebird5825]

welcome to the board.
you are doing well at the age of 35 (almost). i didn't get started til i was 37 or so, and only bought some EE bonds thru payroll. then i woke up and really started the retirement planning thing.
the fact that you have started saving/investing puts you ahead of a lot of people on the curve.
there are some great articles at www.morningstar.com , under the Personal Finance tab, about saving for retirement. also look at yahoo finance.
very nice match on the 401(k). watch your annual expense ratios for funds. keep them as low as possible.
re IRAs, look at the IRS site at www.irs.gov and try to make sense of it all. if you do, let me know! j/k
good luck and keep doing what you're doing. Hppy Birthday!