Most people are somewhat familiar with the “Rule of 72”. In financial circles it refers to how long it will take your money or a particular investment to double, given a fixed annual rate of interest. It is one of those formulas designed to be a quick ballpark calculation and not a scientific certainty. For example, if you took $1 and invested it at 10% it would take 7.2 years to grow it into $2. (72 divided by 10 equals 7.2) So you can see how it’s a general guideline and proves to be more accurate with lower rates of return.
The Rule of 219 is somewhat different and not quite as widely known. Here is how it works:
Each meal costs $5.00
If you assume you eat 365 days
for 20 years
This would cost you $219,000
So in this situation it would cost two people $219,000 to eat during retirement. Now seriously there are a couple of flaws with this plan. When was the last time you only spent $5.00 on a meal? Maybe if you plan strategically and eat at home and clip coupons, but few do this consistently. Now keep in mind this doesn’t include desert or travel to the restaurant or trips to the grocery store or electricity and gas to prepare the meal. This is simply the cost of the food. Now let’s consider the thing about 20 years. With today’s longer life expectancies and advances in medical technology most of us will live longer than our parents and grandparents. This is especially true for women. Retirement could easily be 30+ years.
If it’s going to cost you and your significant other $219,000 just to eat what happens when you throw in the cost of all your other needs? Let’s say you want to buy a new kayak at age 75 or maybe take a photo safari to Africa with your friends or help your grandkids pay for college… then how much will you need? What happens when you want to eat a healthy diet and maybe enjoy an occasional bottle of wine and a meal out on the town with your friends? Oh and what if one of you gets sick? You get the point.
When it comes to retirement planning most people want to know 3 questions:
1. Have I saved enough?
2. Is it invested properly?
3. How do I turn it into an income stream when I retire?
Have you crunched the numbers? Have you given any thought as to just how much you will need? I think you will agree that when you look at it in these terms the need to do some pre-planning is becoming more and more critical.
Planning it’s what we do! Give me a call today to get started on a plan for your financial future.
This information was obtained from sources believed to be reliable; however, it cannot be guaranteed. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy can assure a profit against loss.