A popular retirement myth that won’t die is the idea that one needs at least $1 million dollars to retire comfortably.
The $1 million retirement myth probably got started in the 1980s as a generalized retirement goal to motivate the growing middle class of the era.
However, a retirement number is not a one-size-fits-all metric that can be applied to anyone.
Your retirement number is the amount of money you need to live out your retirement.
You need to consider the current cost of living standards, mortgage and rent, utility, food prices, and other lifestyle expense metrics to determine your retirement number. A retirement number allows you to live the retirement you want, or need, or your terms.
For example, $1 million will allow you to live out your retirement in San Francisco for 8 years.
Or you could live in Memphis, Tennessee for 45 years on $1 million dollars.
These are generalized estimates dependent on the idea that your annual retirement expenses range between $38,000 to $45,000.
The higher the local cost of living, the higher your annual retirement expenses will be.
But income isn’t the whole picture when it comes to retiring. If you have various properties and assets, the best way to prepare for retirement could be to calculate your personal net worth.
What is net worth?
Net worth is the calculation of all personal assets, finances, and properties minus all debts and financial liabilities.
In other words, you can calculate personal worth by contrasting what you own against what you owe.
If you understand your net worth, then you can plan for retirement more accordingly and accurately than just focusing on income solely.
Calculating net worth
To calculate your net worth, all you need to do is to add up the estimated value of your finances and possession while subtracting your debts.
For example, you can add up your cash, stocks, investments, home value, the value of cars and other vehicles, jewelry, bank account, home equity, and so on. Then you subtract rent and mortgage payments, credit card debt, car note payments, student loan debt, and so on.
The number that you come up with is your net worth.
And your net worth is a more approximate calculation of your financial standing with which to plan for your retirement needs.
Consult a financial advisor to get the most accurate calculation of your net worth.