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The Balance of one's liquid assets (not such real assets as one's home, car, or personal property) will be in common stocks or stock mutual funds, and these can be acquired next. Until about ready to retire, they will generally constitute the bulk of one's holdings.
To determine how large the stocks portion should be, one might become involved in many sophisticated variables and formulae. There are any number of retirement nest egg calculators available online, or one can receive excellent help from a financial advisor. But if an approximate amount will do when getting started, an easy rule of thumb is that one needs about 25 times as much set aside as the income called for, adjusted for inflation. Thus, if one were to retire today and wanted an annual income of $50,000, it would be good to have a total of 25 times that or $1,250,000.
But since most will not be retiring immediately, it is wise to factor inflation into one's calculations. At a 4% annual rate, inflation will reduce the dollar's buying power substantially in the next 30 years. So, to be on the safe side and considering that the majority of retirees will live 20 years or so after leaving the world of work, it may be best for a younger worker commencing a plan for financial independence to simply double the initial figure, i.e. for an annual income of $50,000 inflation adjusted, consider building an eventual nest egg of about $2,500,000. For the typical married couple retiree household, this means planning for a $5,000,000 stash by the time they turn 66 or whenever they arrange to stop metaphorically punching a time clock.
That can certainly appear to be a daunting figure. However, it too is subject to adjustments, downward. From an individual person's needed nest egg of roughly $2,500,000, one may subtract 25 times the annual income one should receive from Social Security. Thus, if one will get 12 x $1500 monthly checks a year or $18,000 annually from Social Security, right off the bat one can reduce the total nest egg requirement by 25 x $18,000 or $450,000. (I do not say to double that again for younger workers, because of the rises in Social Security payments due to inflation, since we do not know if that program will still be inflation-adjusted in the long-term.)
Similarly, one can reduce the needed nest egg further by approximately the amount of one's pension or retirement annuity (through where one has worked), again based on the annual income multiplied by 25. Commonly, a retired federal civil service or state government or a military employee has such an annuity, which then may result in the needed total coming down another $500,000 or more.
In our rough and ready example, then, the prospective retiree who starts saving and investing early may have to assure, on the day she or he retires, a personal set of funds worth around $1.5 million, over and above Social Security or employer annuities.
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