Green Retirement

With the economic collapse, and the large number of layoffs, a lot of people are asking themselves “Can I retire with less than a million dollars?” The answer is yes, you can retire with less than a million dollars.  With a million dollars, you can safely spend between $2,500 and $4,000 per month, depending on the age at which you retire.   To retire with less than a million dollars, you need to calculate how much you can safely spend each month, and then build a retirement budget around that figure.

How to Retire With Less Than A Million Dollars

1. Determine Your Net Worth
2. Calculate How Much You Can Safely Spend
3. Create A Retirement Budget

1. How to Determine Your Net Worth

First you need to properly calculate your retirement savings.  If you sell everything you own, and pay off all your debts, how much cash will you have left? That is your Net Worth, and your Retirement Savings, they are essentially the same thing. Your retirement savings, includes all of your assets, not just your retirement accounts.

Your house, cars, couches, boats and baseball cards, are all included in your retirement savings.  Add up the values of everything you own, then subtract everything you owe, the result is your Net Worth.

2. Calculate How Much You Can Safely Spend In Retirement

With your Net Worth determined, calculating how much you can safely spend in retirement is quick and easy, simply multiply your Net Worth by 4%.  The result is how much you can safely spend each year in retirement, divide that number by 12, to get how much you can safely spend per month in retirement.  Here’s the formula and result for a Net Worth of $750,000:

Retirement Spending = (Net Worth x 4%)/12 months

$2,500 = ($750,000 x 4%)/12

With a net worth of $750,000 you can safely spend $2,500 per month.

3. How to Create a Retirement Budget

After you have calculated the amount you can safely spend each month in retirement, it is time to create a retirement budget, that fits within the amount calculated.  Creating a retirement budget is not complicated, simply list all the expenses you would have if you retire today, remembering that retirement gives you greater control over your expenses.  Add up all your monthly retirement expenses and adjust your retirement budget.

 Green Retirement Software

Example of How To Retire With Less Than A Million Dollars
Bob is 55 years old and he calculated that he has a net worth of $650,000.  Using the Free Green Retirement Calculator Bob discovers that he can safely spend $2,167 per month if he retires today.  He calculates that food and health insurance, two necessities of life that can’t be adjusted will equal $900 per month, every other expense from housing to entertainment can be adjusted in retirement.  Subtracting food and health insurance, from his retirement budget, leaves Bob with $1267 to spend on everything else.

Housing expenses traditionally should not account for more than 25% - 30% of a person’s income. That means that Bob, if he wants to retire today, should be looking for housing that costs around $600 per month.  This can be accomplished by either buying a house, with a monthly mortgage of $600 per month, or by renting an apartment for $600 per month.

After subtracting his food, health insurance, and housing, Bob has $667 left over each month to spend on everything else.  Bob has $667 each month to spend on clothing, gifts, entertainment, vacations, haircuts, cable internet, auto expenses, etc.  If Bob were smart, he would find a place to live that does not require owning a car, saving himself a lot of money each month to spend on other stuff.

Bob can also look forward to increased income and lower expenses as he gets older.  Why? In seven years Bob will be eligible for $1,200 in monthly Social Security income, and in ten years Bob will be eligible for Medicare, reducing his monthly expenses by $400 per month.

Don’t let Wall Street fool you into thinking that you need millions to retire,  you can retire with less than a million dollars, simply calculate how much you can spend each month in retirement and create a retirement budget.

Visit the Green Retirement website where you can try our free retirement calculators, our free retirement planning, and learn how you can retire early by going green.