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Paul Nelson reportingWhat do you realistically need before you can retire? Is there such a thing as a magic amount of money that you need to have saved?
If you watch the right commercial, retirement could look like a lot of fun. In his ads for Ameriprise, Dennis Hooper says, "Your generation's definitely not headed for Bingo Night. You still have things to do, right? You have dreams."
Some ads show people finally going into their dream jobs or sailing on yachts. The problem, according to AARP Utah State Director Rob Ence, is many people haven't really thought about what they need before they do it. "There are only about half of the population, 50 plus, who have even put any money away at all."
Ence says it's hard for anyone to envision exactly what retirement is going to be. One out of every four people who do retire go back to work. Forty percent of them go back to work because they financially have to."
Ence says people need to have secured four basic things before they retire: pensions and savings, current income, social security and health care. "If any one of those legs is missing, then the table becomes very wobbly and the resources, other resources will be consumed," he said.
As for how much money you will need, or at what age you should plan to retire, most analysts say there is no such thing as a magic number.
Harris Financial President Kelly Harris said, "There are factors on travel and your health. I mean, people that might be suffering from health conditions later on in life might have much higher expenditures than someone else."
Here's an example. Let's make up a person who makes $45,000 a year. There are two ways to live off retirement: save a lot of money now and spend it all up later, or save even more money and live off the interest. Harris says this is what you would need to live off interest and maintain that $45,000 income. "We'd have to have $905,000 to produce that $45,000 a year at retirement."
Harris says you would need to save roughly $543,000 if you wanted live off the principle combined with interest to maintain the same yearly income. He says there are programs that could guarantee a monthly income of $2,000 if you save $300,000, but once you die, that program doesn't let you pass any money down.
