Q&A: Just how much money do you need to retire?

January 8, 2010

How to know whether to retire is addressed

A: Beginning at age 66, you will be eligible for maximum Social Security benefits of $2,323 per month, or $27,876 annually. When adding this amount to your pension, you will have an income of $87,876.

The next step is to determine how much income you need. As a rule of thumb, use your current income minus any amount you were saving for retirement, since you obviously won't have to save for retirement when you're already retired. Next, reduce amount this by $8,720, which is amount of Social Security tax you would pay if you earned more than $106,800 in 2009 (you don't pay Social Security tax while collecting). This estimate should provide you a rough idea of you basic income needs.

Answers to our readers' questions were provided by Bryan Place, CFP, founder of Place Financial Advisors, Manlius, New York. Send your money management questions to memoney@advanstar.com (please include your regular postal address).