When you first start seriously considering when to retire, how much to retire has to be factored into the decision.
How much will it cost to retire? Should I plan to work part-time?
If you're like me, and dream of retiring early, you probably have things in mind that you want to do. Retirement just means freedom to do other things besides working an 8 to 5 job.
You may even choose to "work" but do it on your own schedule, and how much will be completely up to you.
When will it be possible to retire and how will you know you're ready?
Perhaps you are in the situation where you really love your work, but you also want to travel or spend more time with your family.
If you have enough savings or you can get by on a lower income, you could switch to part-time work and be semi-retired. Or switch to freelance or consulting work.
If you love your job there is no rule that says you ever have to stop doing it. You could just take more control over it.
After I retired early I found that I still enjoyed playing with the technology that had been my career, only without all the management hoops and deadlines. I just do it for fun now, to learn new things and as part of my website research.
You may be able to arrange your work into something better. How much to retire is up to you!
For example, in your late 40's or 50's you might think "Will I be ready to retire by age 50, 55, or will I need to work until Social Security age?"
At least for me, this is when I began to seriously look at how to answer that question.
The next question I had to answer was how to find out what I would actually need to have a comfortable and fun retirement.
That's when I started to be really focused on the numbers. I doodled them, added them up on my phone, on a spreadsheet, in the back of my notebook at work.
It was almost an obsession to get the numbers right.
I read a few books that convinced me that what I had been hearing from the financial media was not necessarily correct. The media message was predominantly "you need 80% of your pre-retirement income" and "you should not withdraw more than 4% from your retirement portfolio" and "rather than a million dollars, you may need two million."
The book that made the best case and convinced me was "Retire on Less Than You Think" by Fred Brock, revised edition.
The difference between what the financial media preaches, such as 80% of your pre-retirement income, and what I learned is that your retirement income should be based on your retirement choices, which have very little to do with your pre-retirement income.
In addition, if you have been living within or below your means then you may have been living on much less than that 80% figure already. They don't take that into account.
So, to get how much to retire you have to do some math. Here are the key questions you need to answer to figure this out.
Read more: How much does it cost to live per month once you retire?
This is where you need to work on a budget of your expenses and other spending once you are no longer working. This should take into account the things you want to do when you have free time. This couple generously shares their retirement budget, income, and other financial details.
Read more: What extras do you want to provide for?
Do you plan to travel, and if so, how often? Over the next 20 or more years, consider what large expenses you need to provide for, such as replacing cars and appliances. You may want to provide for your heirs or spoil your grandchildren.
Read more: When do want to retire?
If you plan to retire early, you'll need a significantly larger amount of savings to cover the years before Social Security or pensions kick in.
How much will Social Security give you?
Social Security may provide a large percentage of your income, or it may not depending on what you plan to do once you retire. It also depends on your work history and earnings on record with Social Security.
How long will you live?
Your family may have a history of long lives which could mean you need to provide for more than 40 years of income. Once you have a reasonable answer to these questions, you can figure out how much cash you need to retire.