It is often a question when you ask someone that is embarking on a FIRE Journey how much they need to retire. They will usually give you a total amount but if you asked in detail why they need that much, they will give you a calculation based on their projected annual income when they retire. The normal calculation is 4% of the total amount of savings with no debt.
I have other financial influencers & friends who have shared with me their expected retirement amount from RM800,000 to even millions for them to live off for the rest of their lives with no debts. Personally, my initial targeted amount was RM4,000,000 where I expect to live off 4% of the amount annually for the rest of my life. That is RM160,000 per annum or RM13,333 a month. Former radio broadcaster Roshan Kanesan was sharing on his Instagram that his goal is to withdraw RM60,000 or RM100,000 for 2 people at age of 60. Looking at all these different goals, each of us has a different amount that we are looking to have at our retirement age.
For my readers, I have been sharing a lot about my retirement goal over the years & my goal is always consistent in what I want to do & when I plan to retire. Before I go further into that, when I decided to start my blog, my ultimate goal is to be a Brazilian Jiu-Jitsu Black Belt & a millionaire which is why I called my blog Black Belt Millionaire. Since it is a long term blog, my weekly writing is to share my journey to be a Black Belt in BJJ & millionaire. When I started this blog, I started as a BJJ white belt & I have just gotten out of financial debt. As of my writing, I am a BJJ Purple Belt & my net worth is close to RM500,000. Since this is my long term blog, I will keep on writing until I am a Black Belt & a millionaire. I am 6 years away from my expected retirement goal at the age of 40 with goals of travelling the world to spread my love for BJJ & exploring other cultures out there.
One thing for sure, it is not easy for me to achieve RM4,000,000 net worth when I am 40 years old. That is why I am working hard to build my side hustle businesses such as my gym, finger tape brand & other businesses to have more income so that I am able to hit my financial goal. Aside from my blog, I also own a YouTube channel where share my passion for BJJ & Personal Finance. (Please help to subscribe to grow my channel). My monthly investment & savings in stocks & other investment platforms also plays an important role to grow my wealth. All those hustles that I am doing are important for me to achieve my financial goals.
If you haven’t calculated how much you need for your retirement, you have to ask yourself, how much do you need monthly for your minimum expenses. Since your debt such as a house or car will be paid off by then, most of your expenses are mainly for basic monthly expenses such as food, groceries, the electric bill, water bill, insurance & other basic expenses. You may also want to have a minimum allocation for your shopping & holiday expenses too. Assume your total expenses is at RM8,000 a month or RM96,000 per annum. Using the 4% Rule, take the estimated annual amount you need & multiply by 25 (4% x 25=100%). That is assuming if you plan to withdraw 4% of total cash your savings for 25 years upon your retirement. Another calculation is forecasting your annual investment return at 4% per annum based on your total savings amount. It can be from your EPF, Fixed Deposit, Dividend from Stocks or other investments. 4% Annual Investment Return should not be that hard if your investment planning is done right.
If you have other incomes such as Hustle Income which you earn from your side hustle, it will also be beneficial towards your retirement since it is short hours of work. Assuming that you are married with kids, you can also add on additional expenses for your allocation for your wife & kids as well. That calculation is important to ensure you have proper planning for your retirement. One of the highest expenses for parents is when your kids are going to further their studies in college or university. Child Education Saving Plan should be something that you should be looking at the start of your retirement planning to avoid high education expenses to be paid from your savings.
Looking at all these expenses & calculations, by now you should be able to have a clearer idea of how much you need for your retirement. First, identify your retirement age & calculate it based on the amount you need annually x 25 -40 years (depending on your retirement age) or 4% of the forecasted Annual Investment Return (x 25 = 100%) to get the amount.
Before I end this week post, I would like to share a quote that I thought to be meaningful for your retirement by Warren Buffett.
OSS!
You can also check out my latest YouTube video on How To Invest Like Warren Buffett:
