{"id":701,"date":"2012-12-22T20:59:58","date_gmt":"2012-12-22T20:59:58","guid":{"rendered":"https:\/\/one-giant-step.com\/index.php\/2012\/12\/22\/what-is-your-magic-number-for-retirementone-giant-step\/"},"modified":"2023-11-29T23:55:11","modified_gmt":"2023-11-29T23:55:11","slug":"what-is-your-magic-number-for-retirementone-giant-step","status":"publish","type":"post","link":"https:\/\/one-giant-step.com\/index.php\/2012\/12\/22\/what-is-your-magic-number-for-retirementone-giant-step\/","title":{"rendered":"What Is Your Magic Number for Retirement?One Giant Step"},"content":{"rendered":"<p><a href=\"http:\/\/one-giant-step.com\/wp-content\/uploads\/2012\/03\/magicnumber.jpg\"><img alt='magicnumber-2614966' src='https:\/\/one-giant-step.com\/wp-content\/uploads\/2012\/12\/magicnumber-2614966.jpg' \/><\/a>One plus the interest rate (stated as a decimal) divided by the number of times interest is compounded by year to the power of the number of times the interest rate is compounded by year times the number of years. All multiplied by the amount of the principle.<\/p>\n<p>Huh?<\/p>\n<p><a href=\"http:\/\/one-giant-step.com\/wp-content\/uploads\/2012\/03\/compound-formula.png\"><img decoding=\"async\" src=\"http:\/\/one-giant-step.com\/wp-content\/uploads\/2012\/03\/compound-formula.png\" \/><\/a>Where:<\/p>\n<ul>\n<li>A = final amount<\/li>\n<li>P = principal amount (initial investment)<\/li>\n<li>r = annual nominal interest rate (as a decimal, not in percentage)<\/li>\n<li>n = number of times the interest is compounded per year<\/li>\n<li>t = number of years<\/li>\n<\/ul>\n<p>Huh?<\/p>\n<p>This is what has been swirling in my head for weeks now. The calculation that tells how much money deposited today will be worth in <em>t<\/em> number of years.<\/p>\n<p>Of course it\u2019s all hedging isn\u2019t it?<\/p>\n<p>We\u2019re assuming we won\u2019t save another dime once we leave Canada. That probably won\u2019t happen. We have no idea when we\u2019ll have to stop working, or what working will look like between now and then. We can\u2019t predict when either one of us will die or how many years we\u2019ll have to finance between retiring and dying. I don\u2019t even want to talk about dying. We don\u2019t know how much money we\u2019ll spend per month once we stop working so we can\u2019t calculate how much we\u2019ll need. We don\u2019t know what interest rates will do. Or the stock market.<\/p>\n<p>If you ask the \u2018experts\u2019 they all say you need 80% of your current income in retirement. But my current income supports me quite nicely here in the Western world. In an expensive part of the Western world. What if I lived somewhere else? Thailand, Columbia, Chile,\u00a0Saskatchewan, Nova Scotia, Belize. What would that look like?<\/p>\n<p>Then I start thinking that it\u2019s doable. That our savings could grow to be enough to support us in a modest retirement. That it\u2019s likely that we <em>would<\/em> still be able to save once we leave Canada. That we won\u2019t get paralyzed by fear and stay here because it\u2019s easy.<\/p>\n<p>That\u2019s my biggest fear. Bigger than that we won\u2019t have enough money. My biggest fear is that we won\u2019t go because we can\u2019t see a clear path to the end. And then I realize that I can\u2019t see a clear path to the end from right here. Staying here is no\u00a0guarantee that it all works out. The only guarantee then is that I haven\u2019t done what I wanted to do.<\/p>\n<p>I\u2019ve been peppering friends and\u00a0acquaintances with the \u2018how much do you think is enough to retire?\u2019 question.<\/p>\n<p>The answers are varied. Some will disclose a number. One million dollars is a popular sum. Others try to suggest some formula outlining how much they think they will spend per month times the number of years between retirement and death. Many duck the question being either uncomfortable with the question or not wanting to disclose their own finances. <em>What is with our culture and its inability to be transparent with finances?<\/em><\/p>\n<p>So, we came up with a number. Based on what we think monthly expenses might be ($4000\/month), when we think we\u2019ll \u2018retire\u2019 (let\u2019s say 65 years old), and taking a wild guess at when we\u2019ll die (I don\u2019t know but we don\u2019t seem to live terribly long in my family\u202680?).<\/p>\n<p>Based on our pension plan contributions so far it\u2019s likely we\u2019ll have a pension income of about $1500\/month between the two of us.\u00a0That\u2019s a yearly income of $18,000 over 15 years is $270,000. So we only have to have $450,000 saved by the time we\u2019re 65.<\/p>\n<p>Hmmm. That\u2019s still a big number. But here\u2019s where that calculation at the top comes in. I\u2019ve worked it nine ways to Sunday and have just about got myself convinced that if we save $200,000 before we leave at a rate of 4% interest over the 20 years until we\u2019re 65 then we\u2019ll have almost $450,000 in the bank.<\/p>\n<p>And then it just comes down to how long it will take to save $200,000. Well $125,000 as we already have about $75,000 saved.<\/p>\n<p>Two years? Three years? Four years?<\/p>\n<p>It\u2019s maddening. Do we really need that much? Do we really need to wait that long?<\/p>\n<p>My next steps are to connect with people who have made the leap. How are they managing this question? Is it blind faith that it will all be okay? Trust that it will work out? Do they have a plan? Have they saved? What\u2019s their number? Is my number too big? Too small? Does it all differ depending on how old you are now?<\/p>\n<p>For once in life, the math is probably the easiest part of the whole thing. It\u2019s what goes on inside my head that drives me crazy.<\/p>\n<p><strong>I would really love to hear what you think. I put the numbers out there in the spirit of transparency and because I\u2019m looking for advice. Are you saving madly for retirement? Are you a traveler or expat who has faced the same questions? What\u2019s your number?<\/strong><\/p>\n<p>**********<\/p>\n<p><em>One way to prepare for a trip away is to try the foods of the countries you will be visiting. We\u2019ve been slurping ramen noodles and enjoying sushi in preparation for our upcoming trip to Japan. If I lived in Perth I might try this <a href=\"http:\/\/www.crownperth.com.au\/restaurants\/premium\/nobu\/about\">Japanese restaurant<\/a> for a tast of the fine dining aspects of Japanese cuisine.<\/em><\/p>\n<p><a href=\"http:\/\/www.linkwithin.com\/\"><img alt='pixel-1144194' src='https:\/\/one-giant-step.com\/wp-content\/uploads\/2012\/12\/pixel-1144194.png' \/><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>One plus the interest rate (stated as a decimal) divided by the number of times interest is compounded by year to the power of the number of times the interest rate is compounded by year times the number of years. All multiplied by the amount of the principle. Huh? Where: A = final amount P [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-701","post","type-post","status-publish","format-standard","hentry","category-blog"],"acf":[],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/posts\/701","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/comments?post=701"}],"version-history":[{"count":1,"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/posts\/701\/revisions"}],"predecessor-version":[{"id":25757,"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/posts\/701\/revisions\/25757"}],"wp:attachment":[{"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/media?parent=701"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/categories?post=701"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/one-giant-step.com\/index.php\/wp-json\/wp\/v2\/tags?post=701"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}