Determining how big of a nest egg you will need to generate enough retirement income is the most commonly asked question when it comes to retirement planning. There are many rules of thumb to calculating your retirement number. I have read articles that say to calculate your retirement account size, simply take 80% of your current income and multiply it by 25. These basic retirement goal calculations are OK, because it gives you a goal to target. However, I will give you a more targeted 6 step approach to calculating your nest egg and better set your retirement goals.
No matter how many years you are from retirement, it's essential to have some kind of game plan in place for financing it. With today's longer life expectancies, retirement can last 25 years or more, and counting on Social Security or a company pension to cover all your retirement income needs isn't a strategy you really want to rely on. As you put a plan together, watch out for these common myths.
Over the past few years, mutual fund companies have flooded 401k Plans with Target-Date funds in an attempt to make portfolio selection easier for participants. They want to provide an “easier” option to retirement savings. For those that aren’t familiar with these investments, they are mutual funds designed to provide an “appropriate” asset allocation based on the date at which you expect to need access to your money. i.e. the day you retire.