The good news is that most of the expenses relating to your children will be gone by the time you retire. Speaking of kids, do you have any? As much as we love them, kids are expensive. Most find that a large home is just too much home and unnecessary once the kids have left the house for good. Not only does this allow them to fund additional money into their nest egg, but it will also decrease home maintenance and expenses. Many retirees will not only have a home paid off, but they will often sell their larger homes and downsize.

Not only does this allow them to fund additional money into their nest egg, but will also decrease home maintenance and expenses.

Many retirees will not only have a home paid off but they will often sell their larger homes and downsize. Mortgages are usually 20% of your current income. Withdraws from your 401k are taxed as ordinary income but is unique due to the fact that the tax rate scales higher as you increase your withdrawal amounts per year.Ī more obvious detail that is often overlooked is that you don’t have to save for retirement when you are retired! If you have been saving 20% of your income, as recommended, that is 20% of your current income that you do not need to replace.Īnother general assumption is that you have likely purchased a home during your career and that you have paid off your mortgage before retirement. Money withdrawn from your Roth IRA has already been taxed and is exempt from being taxed on withdraws. If you decided to move to a state without a state income tax, your tax burden could be lowered as much as 12.3% (12.3% in California highest in the nation).įederal income tax is likely to be lower as you will be earning income that is tax deferred or exempt and scales up as you withdraw more. Your income will be derived from your retirement accounts and will, for the most part, not be derived from “work” as you will now be retired. The reason is due to several large factors that are discussed below.įirst, you won’t be paying Social Security or Medicare tax. Why would the level of income needed be below the common rule? Well for many doctors, your tax burden is likely to be far lower in retirement. While this will not be the same across all professions, the good news for doctors is that the actual number is probably much less. Here we go: Step 1: Find Out How Much Income You Will Need Each Year In RetirementĪ common rule of thumb in planning for retirement is that you need 70% of your current income to live the same or similar lifestyle during retirement. So, today we are going to examine, in detail, an example of a physician who is trying to save for retirement but is unsure how much they should save. It’s a complex question, one that really takes some time and a well thought out plan to achieve. Have you been struggling with one of the biggest questions nearly every doctor asks themselves: What is my retirement number?

Retirement magic number