#012 – How can you calculate how much you need to retire?
In this episode, Mayra shares what you need to ask yourself to prepare yourself to retire comfortably. She also covers what FIRE means and how you can achieve that.
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[0:00] Everybody wants to retire comfortably. However, most don’t know how much you need in order to do so. On today’s show, we’re gonna be talking about all things retirement.
[0:13] Welcome to Debt Free Latina, the podcast where you can finally realize your dream of being debt free and feeling peace about your financial future. And now your host, Mayra Alejandra Garcia.
[0:31] Hola, hola. Thank you so much for being here. On today’s show, I want to talk about what are the things you need in order to get your financial life in order, in order to retire comfortably. And there are a couple of things. One, is you need to ask yourself a few questions. And there are several investment and retirement calculators online. You can just Google that and find what that number is, in order for you to retire. And a lot of these investment calculators will ask you for your current age, for what age you plan to retire. You’ll need some basics, basic numbers, in order to submit that information, like how much you’ve saved so far, and there’s no shame in saying you haven’t saved anything yet. A lot of us haven’t and that’s okay. And so how much do you plan to contribute. And I would suggest that you don’t contribute anything until you are completely debt free, and I know that’s very controversial, and I know a lot of people disagree with me, but it is important to focus on eliminating the debt, because then you can contribute so much more. And when there’s focus intensity in paying off anything, you move faster. And so you’ll move faster with anything if you just focus.
[2:08] And then you have to also think about how much do you think you will need in an annual income in order to survive after retirement. So you need to ask yourself questions like, will you still have a mortgage? I personally don’t plan to. And so if you follow the baby steps, you will have your house paid off in 15 years. So if you start, let’s say in your early 30s, by your mid to late 40s, your house will be paid off. So hopefully you can at least have a paid-off home by the time you retire. That’s the goal. And, honestly, having a house paid off is actually one of the very common factors that a lot of millionaires have. That’s a really important goal. And I think for me personally, it has been at the very top of my priority list to pay off my home so that I can align and better approach my finances, because if I can eliminate that debt, and be completely debt free, not only consumer debt free, which I already am, but also mortgage free. So, having these numbers readily available are super important, and again you can use any calculator online.
[3:37] What do you want your lifestyle to look like? You need to ask yourself, do you plan to travel? Do you plan to maybe be a snowbird where you live in the warmer climate in the winter, so that you don’t have harsh winters, and you live in maybe the eastern part of the country, in the summers, so that you don’t live in hot Arizona in the 120 degree weather that we’ve got going on here in the summers. And these are the things that you need to ask yourself. It is really important that we partner with somebody we trust with our retirement, and that you investigate who is your financial advisor. I’m blessed to have one here locally in the Phoenix area. If you are in the Phoenix area, I’d highly recommend that you send me a DM on Instagram. I can share with you who I work with personally with our personal finances. His name is Trent, he’s amazing. This is not an ad, I’m just willing and able to share this information that I have, and I completely trust this man. He has been great at managing our retirement funds and some of our investments, and have complete visibility to everything he’s doing, he explains everything really, really well. It’s really important that we have a number. How much do you need in order to retire? And then you can course-correct and plan accordingly. You work backwards. So if you need, let’s say a million dollars. Well, if your rate of return is about 10% in interest, you can work backwards. Okay, well, how much do I need to provide, or invest, I mean, into a retirement fund every month or every year? And so you can do certain things or certain limits with things like Roth. So, putting retirement into like a regular IRA, or your purse, your work 401k, or 403B. Depending on your line of work, you can invest a lot more in pre tax money. And so I believe it’s like almost $20,000, that you can invest into retirement in a IRA or a 401k, 403 B. And that’s amazing. I think most people and it was something that came to me, somebody very close to me told me they didn’t know that they can invest almost $20,000 a year in pre tax money. I would suggest that you invest first in post tax, so that it’s already been taxed now, so when you pull it out, it just means you won’t be taxed again. All of the money that you’ve invested has already been taxed so you don’t get taxed again when in retirement. And pre-tax money is money they take, of course before your taxes, so when you do withdraw that, you get taxes taken out then, so in the future, in your retirement. Some people have really high incomes and so it’s important that you know that if you have a really high income, it’s beneficial to do pre-tax dollars and I know there’s some restrictions with Roths if you have a really high income, so work with a financial planner that can explain everything for your situation. Everybody has a different personal finance situation and it’s important that you know what are the tax savings and tax benefits for you.
[7:47] I’ve been asked recently about a hashtag that is going around in the financial world. That is FIRE, and what does it mean? It means financial independence, retire early. These are people that want to be financially independent, that are looking and seeking to retire early, so they’re willing to save as much as possible, invest it, and I think it’s wonderful. I think it’s great. I don’t plan to retire early, I plan to work. I think that there will always be something I’d want to do. I’m a multi passionate person. And so I think being financially independent is great. I think retiring early, if that’s a goal of yours, is amazing. I think it’s possible. And so, yeah, I would just be careful with some of the advice that is on Instagram because a lot of people have different ideas on how you can achieve this, and some take some risky, they make some risky choices, and you just have to make sure that whatever risk you take, you are able to bounce back, should you lose everything. So the more the risk, the more your gain or loss can be. So make sure you are careful with that. If you have any questions about FIRE or any questions you’d like for me to answer here in the podcast, feel free to send me a DM on Instagram.
[9:23] Thanks for listening to Debt Free Latina. Make sure you hit that subscribe button so you can take Mayra with you on your journey to become debt free as you build financial wealth. Looking for more? Follow Mayra on Instagram @debtfree.latina, on Facebook @debtfreelatina, and online at debtfreelatina.com.