Three Key Calculations to Help You Plan Your Retirement

How much money is needed to retire comfortably? That is a very good question. It is also one for which there is no easy answer. The good news is resources like the free Yieldstreet retirement calculator can help find an answer that best fits each person’s circumstance, as well as the lifestyle they want to enjoy in retirement. 

How Much Money Will Be Needed?

A basic rule of thumb for making this determination is guided by what is known as the 25x rule. Essentially, it states that in order to live without generating new income, a person will need to have accrued 25 times the amount of money they anticipate needing in retirement. 

To arrive at this figure, one first multiplies their current monthly budget by 12 to define their annual budget. Multiplying the product of that calculation by 25 returns the amount needed—assuming all expenses remain constant. 

At What Age Is Retirement Feasible?

The key is to calculate the total amount of time required to accrue the sum indicated by the application of the 25x rule. Subtracting the amount of savings currently on hand from the 25x result will indicate the additional amount needed. 

Applying a compound interest calculator to that figure, assuming an annual growth rate of 6%, will indicate the amount by which the current savings will have grown at a given age. 

Subtracting that number from the result of the 25x rule calculation—then dividing the difference by an estimated savings amount—will return the number of years required to reach the established monetary goal for each age chosen. 

What is the Optimal Withdrawal Amount?

People who have considerable experience in these matters recommend adherence to the 4% rule. This calls for withdrawing 4% of retirement savings the first year, then repeating the process each following year, with an adjustment for rate of inflation. 

Assuming a 6% average rate of return on investments with a 50/50 mix of stocks and bonds, withdrawals in these amounts can be sustainable for approximately 30 years. 

This assumes the underlying portfolio remains invested during retirement—and the market returns historical averages. To counter the implied risk, alternative investments have the potential to make portfolios less sensitive to public market short-term swings. 

Alternative Investments and Portfolio Diversification

Real estateprivate equityventure capital, digital assets, precious metals and collectibles are among the asset classes deemed alternative investments. These asset classes were traditionally accessible only to accredited investors and institutions buying in at very high minimums. However, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors.

Learn more about the ways Yieldstreet can help diversify and grow portfolios.

In Summary

These three calculations can help you plan for retirement. However, there are other elements to consider. These include factors such as taxes, inflation and required minimum distributions. The free Yieldstreet Retirement calculator also takes those into consideration to help arrive at a more accurate estimate. 

Source: Yieldstreet