Frequently Asked Questions

When can I afford to retire?

The answer to this question is different for everyone. Some of us can retire tomorrow, while others will be able to retire after several decades of saving and investing. Some may even feel they’ll never be able to retire! However, the first step in determining this is to determine how much money you’ll need on an inflation-adjusted basis to survive each year.

How to Calculate How Much You Need to Retire

This amount should take into account the quality of lifestyle you’re accustomed, while also being realistic. After this annual income need is determined based on all your retirement sources of income (social security, 401(k), pension), the second step is to calculate how much money you will need to accumulate or save in order to withdraw that amount each year—without outliving the money you have accumulated through strategically saving.

Adjusting for Inflation

The third step in this equation is to determine the inflation adjusted number of this amount. For example, if we determine you’ll need to save $1,000,000 for retirement over the next twenty years, we will need to factor inflation to that dollar amount. Specifically, if we peg an annualized inflation rate of 3%, the $1,000,000 you planned to save actually is more like $1,800,000 after adjusting for inflation. Given this example, it is obvious that inflation becomes a key risk when saving for retirement and it is therefore necessary to limit inflationary risk by properly investing so you can afford to retire.

How to Afford to Retire

It is easier to answer the question of when can I afford to retire as this is a quantifiable number that we can assign. The toughest part of this process is the how I can afford to retire. The easiest answer is: save, save, and save some more. In order to achieve this target amount, it is necessary to:

  • Fund as much as possible your company’s retirement plan
  • Seek to invest in an Individual Retirement Account (IRA) for you and your spouse
  • Align the risk of your investments to the time in which you plan to draw on your investments

For example, an investor in her 20’s may be properly invested if her portfolio is entirely in equities, while an investor in her 50’s may be properly invested if it’s a balanced mix between equities and fixed income.

Retirement Planning from Geier Asset Management

The final step to this process is to not be overwhelmed. It is our job to work with you in writing the blueprint for a retirement plan. In this plan we can account for income and growth opportunities, while providing the short term objectives you must achieve to meet your long term goals. It is never too late to start planning for retirement and you are taking the necessary steps.

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retirement planning guide from geier