My Goals for Retirement

Retirement is a subject I think about a LOT but I still don't feel like I have a clear path and goal for it. At this point I see myself in retirement doing a fair bit of travel abroad and spending at least half the year outside of the USA. If I do spend time within the USA I will most likely be visiting with family and friends for shorter periods of time.

What I want in retirement:

  • Passive Income: I want enough money coming in to cover my basic costs
  • No outstanding loans or liabilities
  • No need to work 40 hours a week to cover my costs
  • Projects to give me focus and self enjoyment (ex: volunteering abroad)
Figuring out what I wanted was the easy part. I do have a vision of where I want to be in life. The unclear part is 1) How much money do I need to have saved? and 2) How will I earn and invest the money I do save in order to meet that target?

  • Annual Rate of Return: 8%
  • Monthly Income needed: $2,100 (in today's dollars)
  • Desired rate of withdrawal 4%
Based on my assumptions that means that if I were to retire today I would need $630,000 invested at 8% return in order to be able to draw 4% ($25,200) annually. This is assuming taxes are already paid and my take home is $2,100 month.

If I factor in an assumed total tax rate of 20% then I need to withdraw $31,500 per year to be able to have $25,200 in spendable cash. That raises my total assets target to $787,500 if I were to live completely off investments with no other income source.

This raises yet another issue for me. I am considering having some rental properties that will generate income and therefore reduce my need for investment. I like the idea of paying a mortgage each month and gaining rent where I keep the difference. The homes are still investments and I have the added advantage of not needing to pay FICA taxes on the income. I also will find side work from time to time but have decided that will be bonus "play money" for splurges that I will want at the time.

Looking at the big picture I am a long way off from this goal. My main goal for this year is to increase my income as much as I can this year and beyond. Each dollar I save is another dollar closer to the above dream. I will have to keep the focus and not fall victim to too much lifestyle inflation a long the way.