How Much Money Will You Need

The first thing you have to do

Before you can determine how much money you’ll need, you have to think about what kind of lifestyle you want to enjoy. You have to have some idea of the kinds of things you want to do with your newfound free time.

For some, retirement means having the time to spend in the garden. For others, retirement means having the time to travel. Gardening costs very little. Travel costs a lot.

The point is, what you do with your time determines how much money you’ll need. So you’ve got to sit down, gaze into your future and ask yourself some questions like:

• When do you want to retire?
• Do you plan on downsizing your home?
• Will you sell your expensive city home and move to the country?
• Will you be moving to a retirement community?
• Will you rent or own a vacation home?
• Will you spend time in warmer climates? How long?
• Do you plan on any major purchases or renovations to your home?
• Will you travel? How often? How far?
• Will you stay in costly hotels or will a B&B do?
• Will you work part-time while retired?
• Will you become more active in your community?
• Will you get involved in volunteer work?
• Will you be supporting or helping to support any family members?
• What hobbies will you pursue? What will they cost?
• Will you join a golf club? Or buy a boat?
• Will there be much dining out? Theatre? Movies?
• Do you want to spend your capital over your lifetime or do you want to leave an estate?

Each one of these questions relates to money. How you answer determines whether you’ll need more or whether you’ll need less.

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Retirement is nothing like what it used to be

Exactly what is “Retirement”? Most dictionaries say it’s “withdrawal from one’s occupation or business. One definition even says “withdrawal from office, business or active life”. Imagine that. Withdrawal from active life!

These definitions are sadly outdated. Maybe we used to think of retirement as a gold watch, an end to work and the beginning of a life of leisure. But better health and longer lives are changing that.

More and more, retirement simply means the end of a 9 to 5 routine and the freedom to do whatever you want, whenever you want. For many that means a new career or perhaps an extension of the old one. And for many, this new freedom could last a long time.

"The secret of a long life is double careers. One to about age 60, then another for the next 30 years."      David Ogilvy

Statistically, most people who reach age 65 without significant health problems can reasonably expect to live at least another 20 years. And over one-third of individuals now between the ages of 55 and 65 will live well beyond the age of 90.

So there are two countervailing forces at work. On the one hand, we’re living longer, so we’ll need more savings. On the other hand, we’re working longer, so we’ll need less savings. As long as these forces are relatively equal in their effect, everything should work out just fine.

Next: The biggest threat to your security 

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