Understanding your financial picture needn’t be that complicated.
Simply staying on top of a half-dozen key money numbers can bring your financial picture into focus and improve your financial well-being, says financial columnist Kimberly Lankford in an article for AARP.
Interviewed for the article, Mari shared with Kim one quick and easy tip for measuring your retirement readiness.
If you are nearing retirement age, add up the value of your retirement savings and investment accounts. Then divide that amount by 25. That’s roughly the amount you can withdraw from savings each year in retirement, assuming you are in your 60s and want your money to last 30 years or more.
Add that number to what you expect to receive each year from Social Security, pensions and other sources to estimate your total annual income in retirement. Is that enough to maintain your desired lifestyle? If not, writes Kim, you may want to start saving more, delay your retirement date, or both.
Savvy blog readers probably recognize this as just another version of the 4% withdrawal rule of thumb that myself and many other CERTIFIED FINANCIAL PLANNER™ professionals often refer to. It’s quick, it’s easy, and helps ensure you’re on the right path to a secure financial future.
It’s a good idea to revisit your net worth calculation annually. In the years leading up to your retirement, it should generally be growing year-to-year, with allowances for dips in the market, advises Mari.
Want an easy way to measure your retirement readiness?
Read Secrets to Financial Success: It’s as Easy as 1-2-3
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