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If you earn $100,000 a 12 months and wish to keep that earnings into retirement, plus account for inflation, how a lot would you really want to avoid wasting? That’s the query Eric, a GOBankingRates reader, lately submitted as a part of our Top 100 Money Experts sequence. To assist reply it, we turned to Jamie Hopkins, CEO of Bryn Mawr Trust Advisors, chief wealth officer for WSFS Bank and a Wall Street Journal best-selling writer.
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Hopkins has intensive expertise guiding shoppers on retirement planning and wealth management, and his insights may also help anybody seeking to decide how much they need in their retirement nest egg.
To give Eric a broad sense of what he would possibly want, Hopkins shared a basic rule of thumb: If you’re 10 years or extra from retirement, you’ll seemingly want about 70% to 80% of your pre-retirement earnings to keep up your life-style.
Since Eric makes $100,000 a 12 months, that interprets to roughly $70,000 yearly. But that begs one other query: How a lot would Eric want in financial savings to generate that amount of cash?
“A short-form analysis is that for a 30-year retirement, you need 25 times that amount, or $1,750,000 saved for retirement,” Hopkins mentioned. “That assumes you have no Social Security benefits. The average Social Security benefit for 2025 is about $2,000 a month, or $24,000 a year. Adding this to the equation, you’re likely right around $1.1 million.”
Hopkins was clear that this estimate is a conservative place to begin, because it doesn’t account for the nuances of Eric’s particular funds.
“If you work past 65, have more in Social Security, or spend less in retirement, you could need far less in savings,” he added.
There’s hardly ever a clean, good path that leads you to the best quantity for a snug retirement. Both exterior and private elements — like inflation, basic well being or anticipated longevity — can have a profound influence on how a lot you’ll want.
“When we talk about how much money you’ll need in retirement, everything starts with the assumptions,” Hopkins mentioned. “Retirement age, life expectancy and inflation are the three biggest drivers of the math.”
He inspired readers to consider their retirement financial savings targets as a “moving target,” topic to vary relying on any of those key elements. He broke down how each might have an effect on the result:
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Retirement age: To retire at 65 or 70 — that’s the query. How you reply it might change the numbers dramatically. “Those extra years of earning — and fewer years of drawing down your portfolio — make a huge difference,” Hopkins mentioned. “Pushing back Social Security for a few years can also have a huge impact.”
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Life expectancy: One of the largest errors retirees make is underestimating how long they’ll live, leaving them susceptible to outliving their financial savings. Hopkins recommends planning for no less than 30 years in retirement. Of course, retiring later naturally shortens the interval of withdrawals.
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Inflation: Hopkins famous that even at 2% to three% per 12 months, the price of dwelling doubles roughly each 25 years. If a reader like Eric needs $100,000 of buying energy immediately, he would possibly want $200,000 or extra yearly within the later retirement years.
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