More than I thought.
I estimated that I would need to 20 times my final base salary to comfortably retire since neither of us had a pension.
It did work, but it was really tight.
What happened:
- The Great Recession of 08/09 happened right after I retired. Reduced our retirement accounts by nearly 50% and it took several years to recover.
- Interest rates dropped to nearly 0%. I was counting interest rates being around 5% for most of my retirement.
- While my spouse and received retiree health insurance at reduced premiums, our two minor children had to pay full premiums for health coverage.
- I retired at 49, which meant I wasn't eligible for Social Security.
What helped:
- The market recovered and my retirement accounts recovered.
- Early on, we paid off our mortgage which significantly reduced our monthly expenses. We had already paid off our cars and didn't have any credit card or student loan debt.
- I had deferred compensation payments for 7 years during my fifties.
- We were able to avoid using any funds from our tax advantaged retirement accounts.
What made a difference:
- Interest rates are now at 4-5% making CDs and Bonds good income generating investments.
- The stock market recovered and is much higher than when I retired.
- We were lucky and our parents left an inheritance equal to about 50% of our own savings. We haven't spent any of the inheritance principal, only the earnings, and the principal has increased with the growth in the economy.
- I started taking Social Security benefits before full retirement age.
Bottom line: I believe a significantly higher retirement savings amount is needed than when I retired. If retiring early (e.g. in the fifties), I'm guessing 30-40 times final salary in savings. If already receiving Social Security payments or a pension, perhaps towards the lower side.
This is not financial nor retirement advice. Please consult a professional advisor.
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