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Jerry Citarella: How much do I need to retire?

Financial Truth

Posted: October 18, 2011 1:55 a.m.
Updated: October 18, 2011 1:55 a.m.

The title of this column is more than that. Statistics show that it’s one of the most searched questions on popular Internet search engines.

Each month, this exact question and phrases very similar to it are typed in by tens of thousands of people looking for answers. Once I discovered this, I felt compelled to cover it here.

How much do I need to retire?

This is such an open-ended question. While I understand the desire to ask, it scares me just a bit that so many people are surfing the Internet for the answer.

I’m wondering if some people think they’ll find an answer, something like, “You need $1,234,396.42 to retire,” and then simply say, “All right, that’s all I needed to know.” Actually, you can get answers like this on many websites, but what do they really mean?

There are many calculation programs you can find that will allow you to input facts, such as: your current age, income, current savings, the age at which you wish to retire, what you think the long-term inflation rate will be and how much you will earn on your money in retirement.

The calculators will then spit out a number that is supposedly the amount of money you need to retire. Sounds easy, right?
If it were this easy to get to a comfortable retirement, then why are the majority of people not there — or way off course?
I believe the answer is simple. Many people look for short-cuts. They’re reluctant to take the steps that are truly necessary to get where they need to be.

I think these types of tools are great starting points, but true guidance and planning are lacking.

So many factors go into properly planning a retirement that there is no way just knowing an arbitrary number based on a few predictions can really accomplish anything. The types of calculations involved can actually move people in the wrong direction.

I see a lot of people become so overwhelmed when provided with a specific and necessary retirement savings amount that they shut down instantly. They feel there’s no way they can get where they need to be, so they wonder why they should even try. Most people have trouble saving for a vacation or a down payment for a car. Imagine the feeling when they see that they need millions to have a successful retirement. Oh, boy!

The saying I like is, “The best way to eat an elephant is one bite at a time.” This isn’t more appropriate in many places than when it comes to financial planning.

Your needs and goals need to be broken down into bite-sized pieces. One of my favorite television shows is “Man vs. Food.” In the show, the host Adam Richman takes on food challenges. He usually attempts to eat something in excess of 5 pounds.

He’s often successful, but could you imagine if he looked at the entire plate as his challenge, versus focusing on the first bite, then one at a time thereafter? Psychologically, he’d never be able to finish a challenge. Getting to retirement is no different.

When asked, “How much do I need to retire,” I usually answer, “a lot.” What’s a lot? That’s different for everyone.

Very few people actually reach their retirement goals according to typical calculations. This is usually because people wait so long to get serious about it. If we advisers focus too much on a typically unattainable goal, we’re setting you up for failure.

It makes more sense to accurately figure out how to effectively accumulate as much as possible and set up some shorter-term goals; one of them being to regularly increase your savings.

I actually had a client that increased her regular savings by $5 per month. This may sound silly, but it was a big step, and made her feel great about herself. Psychologically, it was much better for her future than constantly chasing a likely unattainable goal.

My advice to you? Save as much as you possibly can understanding that short-term successes will get you much closer to your long-term goals. If you end up saving more than you need, good for you. Invite me out on your boat, and let’s celebrate together.

Jerry Citarella is the owner of Infinity Wealth Management 23734 Valencia Blvd., Suite 301, Valencia, (661) 255-9555, ext. 11. He is also the author of “The Truth Helps” series of financial planning books. Mr. Citarella’s column reflects his own views and not necessarily those of The Signal. Submit questions to: Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Infinity Wealth Management is not an affiliate of NEXT Financial Group Inc.


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