114 • MARTIN H. RUBY
Step 1: Estimate how much income (adjusted for inflation) you’ll need each year in retirement. Take an educated guess about what kind of income you will need each year in retirement. As we discussed earlier in the book, many experts recommend a minimum of 70 percent of your pre- retirement income. However, keep in mind many active retirees spend just as much in retirement as when they worked. Figure out the amount of annual income you want in today’s dollars, and then add about 2 percent per year (from now until your retirement date) to account for inflation. To make it easy, I’ve added an inflation “multiple” for a range of ages. Pick the one clos- est to your age, and just multiply your annual income number by that amount.
If you save for retirement in a qualified plan, like a 401(k) or IRA, you’ll need to figure in taxes, too. It’s impossible to know what your tax rate will be when you retire, but it’s a safe bet to add 25 to 30 percent to cover state, local, and federal taxes. Following is an example for my thirty-nine-year-old daughter Rebecca, and a space to work out your personal numbers as well.
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