A Retirement Planning Formula you won't find on Oprah

When it comes to Retirement or Estate Planning, you're on top of things.

Yeah, right!

Who can blame you?

It's hard to warm to the bunch of letters and numbers and legalese that comprises financial planning in the US.

401Ks, 403Bs, Traditional IRAs, Roth IRAs, Annuities, Revocable Trusts, Irrevocable Trusts,1031 exchanges...Ouch!!!!

Let's reach for the remote and see what's on Oprah or ESPN instead.

Honestly, I understand why retirement planning is such a turn-off.  I really do!

After all, you have to take the money you'd rather spend on the latest I-Phone or Home-Theater system or deck you want to add to your house, and squirrel it away for an unknown future.  And then there's all this stuff to understand on top of it.

Much nicer to push it to the back of your mind and watch Oprah interview Jenny McCarthy about her latest book instead.

Jenny who?  Sheesh, Minoo, you should know that - Jenny McCarthy is Jim Carrey's ex-wife!                                                                             

I was like you until a few years ago.

Then I woke up one day and said "my goodness, Minoo, look at all the time you've lost".

And I've been playing catch up ever since.

I don't want you to make the same mistake.

So I've decided to parcel out some simple retirement planning education.

A little bit at a time.

No heavy stuff today, I promise.

I will limit myself to talking about a SINGLE retirement formula which is really easy to grasp and remember.

Stay with me - I promise this won't be hard or complicated.

Question : How much will you need to have saved when you retire?

The Answer to that is this Formula:  

Annual Expenses x 25
 
It's that simple.

Take your current annual expenses.

Subtract those expenses you think you won't have when you retire (your mortgage, children's education costs, etc).

Add some money for those expenses you think might be higher in retirement - Medical & Vacation expenses come to mind.

And multiply the number you get by 25 (years you can expect to live after you retire).

That becomes your Personal Retirement Savings Target.

The amount you need to save for retirement.

The 'Number' you see referred to in bank ads such as the IngDirect ads is the same thing - Your Retirement Savings Target.

"The Number" is also the title and subject of a best-selling Retirement Planning book by Lee Eisenberg. You may want to read it when the remote comes unglued from your hand.

So what's your number?

Let's say Jenny McCarthy decides her annual expenses in retirement will be $100K per year.

Her Personal Retirement Savings Target is $100,000 x 25 = $2,500,000.

Or $2.5M.

That's what she will need to have saved by the time she stops working.

There, that wasn't so hard, was it?

Want to figure out how much you will need to save in order to reach your number?

Use this Online Calculator from Finra.

What you discover could make you laugh.  Or cry.

Either way it will open your eyes.

Like it did mine.

Ok, lesson over.  Now you know what to do as soon as that remote comes unglued from your hand! 

If it ever does!:):) 

Please note, if your retirement savings are currently all in Bank CDs, you should enter a maximum of 1% or 2% for yield in the FINRA Calculator.

Also, please note:  A part of your retirement expenses will be met from your Social Security benefits.  You can subtract the Social Security amount from your expenses before multiplying by 25.