On the Ramsey Show – Highlights Youtube channel, the American personal finance personality advised a caller on how he can retire a millionaire. Dom wanted advice on the amount of money he needed to retire.
He asked: “what should be my rule of thumb?”
Dom wanted to retire with $3million (around £2million) by the time he turned 67, in 12 years.
He explained that he max’s out contributions for his pension and his tax free allowances.
However he still fears “it won’t be enough”.
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
As everyone is different and they lead different lifestyles, the finance expert stressed that there is no “ideal amount” for a group of people and their goals.
There are tools available for people to use which can give a rough idea however this can never be 100 percent accurate.
Mr Ramsey suggests that people use the ‘R:IQ’ to work out their “ball park number”, and how much is needed to invest each month to suit their goals.
If Dom is maxing out his tax free investment vehicles and is following Dave Ramsey’s ‘Baby Steps’, he should have “more than enough” when he comes to retire.
The amount he needs will depend on his lifestyle.
How many times he plans to travel, how many mission trips he wants to do and how much giving.
Mr Ramsey said people need to know their retirement IQ (R:IQ).
He explained that for someone making $60,000 (around £45,000)a year, they can definitely make millions.
He continued: “If you do what we teach and save 15 percent of your household income from age 30 – 70, you would have about $8million (around £6million) in a good mutual fund.
“If I’m half wrong, you still have double what you’re projecting.”
As long as people can live off the growth in their pensions and investments, they will be fine.
Mr Ramsey continued: “Let’s say you had $3million (around £2.2million) invested and you were getting annual growth around 10 percent.
“That’s around $300,000 (around £228,000)a year, without touching the $3million.
“If the annual growth is eight percent, that’s about $240,000 (around £183,000).
“As long as you can live off the growth of your investments, it will be enough.
“The trick is to have a nest egg big enough that you can live off the money it makes without touching the initial investment you put in for years.”
The finance expert explained that in reality, if people have no debt, they don’t require as much money anyway.
This allows people to be more in control of what they are saving, and what they hope to draw from their investment each month during retirement.
Source: Read Full Article