Your Magic Number for a Comfortable Retirement

comfortable retirement
We all want to make sure we save enough for a comfortable retirement. But in today’s world, how much is “enough”?
It all depends on who you ask, I suppose. Jason Zweig thinks he has the answer.
Zweig is a highly respected and intelligent financial columnist for The Wall Street Journal. In fact, the name of his column is “The Intelligent Investor.” Zweig recently wrote an interesting article titled, “Retiring on Your Own Terms.”
In it, Zweig suggests there’s a concrete magic number for how much money you need to save to retire comfortably. He says:
“To be assured of having enough money to fund a comfortable retirement, you should save a total of 22 times the annual income you want to earn when you retire.”
In real terms, if you want to take home $100,000 in annual income after you retire, that would mean you’d need to save a whopping $2.2 million between now and then! That’s not chump change.
Of course, not everyone needs $100,000 a year to be comfortable when they retire. More importantly, Zweig didn’t factor Social Security into the equation. But the average retiree only receives $1,300 per month in Social Security checks, or $15,000 a year.
Furthermore, there’s a lot of uncertainty swirling around Social Security these days. The social security trust fund is currently only fully funded through 2033. That could always change. But Social Security is no longer something you can just automatically count on.
Add in the fact that human beings are living longer than we ever have before. Many people working today are likely to live to 100, or even 105. For those who want to retire at 65, that’s as much as 40 years you’ll need to live on your retirement savings.
It’s a scary thought. But it’s one that you can combat through not only diligent saving but also sound, conservative investing. You don’t want risk to enter the equation when you’re saving for a comfortable retirement. Zweig recommended Treasury inflation-protection securities, a.k.a. TIPS, as one low-risk option. But with interest rates still near zero, government bonds aren’t particularly appealing at the moment.
Blue-chip dividend stocks are another alternative. “Dividend Aristocrats” are a good, low-risk place to start. It’s a list of 54 companies that have increased their dividend payouts for at least 25 straight years. Coca-Cola (NYSE: KO), Exxon Mobil (NYSE: XOM) and Wal-Mart (NYSE: WMT) are among the companies on the list.
Few Dividend Aristocrats offer huge yields. Only three of them yield more than 4%, in fact. None of them will make you rich overnight. But if you’re looking to see your money grow steadily for the next 25 years, these dividend stocks are fairly safe bets.
If you’re still in the working world, saving 22 times your annual income for retirement seems like a daunting task. By putting your money to work now, however, you can be better prepared for when you decide to hang it up.

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