How much money you need for retirement?
This money formula for retirement fund is from Mr. Money Moustache; Multiply your Average Monthly Spending by 25 years , this is the amount you need for retirement then invest it on investment that can give 7% yearly returns. You can have 4% withdrawal every year from the funds, the remaining 3% from returns is considered the inflation rate.
The big question here is how you will achieve that retirement amount. Here are 3 important tips;
First, Increase the percentage of your savings rate. Let's say you are earning 20000 and able to save 10% monthly increased it to 30% or increased your monthly income by 10% , the amount of savings will increased by 10%. Consistency is a key.
Second, Invest your savings from tip 1, mid to high risk investments such as stocks or mutual funds that can give at least 8% returns. Knowledge is a key.
Third, Side hustle. Earning on the sides and creating money machines will definitely helps you filled in the retirement funds. Cash cows from your skill or talent is a key.
Looking forward to your retirement.
Jonathan Ruiz CPA, MIB