How much money does a pharmacist need to retire?

I recently ran an analysis through my 401 (k) provider to check what is the optimum age for me to retire at. My 401 (k) provider, Empower advised me to retire at the age of 70 to get the full retirement benefit! Well, you might be thinking about how long can I live to enjoy that retirement? As you can see below if I were to retire at 70 years old I will have 17 years to enjoy my retirement.

My full retirement age is actually at 67 years old. This is very interesting information for me. Let’s go to retirement 101. You can officially retire at the age of 62. But according to SSA, my social security benefit will be reduced to 70%. Essentially I am forgoing 30% of my social security check by retiring at the age of 62.

Source: Life expectancy from the SSA retirement calculator

Full Retirement

According to the above chart, my full retirement age is 67. According to the SSA, if you delay your retirement age beyond your full retirement age then you’ll get what they called a “delayed retirement credits” annually. If you’re born in 1943 or later each year you delay your retirement benefit, you’ll get an 8% yearly rate of increase. So in my case, if I delay my social security benefits until I am 70 years old then I’d boost my monthly security check by 24%!

401 (k) Calculator

Smart Asset has a calculator to estimate your how much your 401 (k) is worth when you retire. Let’s give it a test spin.

401 (k) calculator Source: Smart Asset

An average pharmacist making a salary of $126,000 will have a portfolio of more than $1, 6 million by the age of 67 years old. Of note, this is only focusing on your 401 (k) account and not accounting for your social security benefit and other sources of passive income from your other investments.

Growth graph courtesy of Smart Asset.

Retirement Calculator

I want to take my analysis further by using another source. Nerd Wallet has a good free retirement calculator just for that. Let’s review their methodology. The first set of data they ask for is my current savings and rate. It’s currently at 14% and my 401 (k) fund is in six figures. Your first input is your salary. Pharmacists are averaging a salary of $126,000 according to the latest data from BLS. Nerd Wallet is recommending at least 10% of your savings and gradually move up to 15% savings or more. According to the calculator, I will need to have 70% of my pre-retirement income. And finally, the calculator is assuming an average investment return of 6%.

Source: Nerd Wallet

If I wanted to retire by the age of 65 with all the mentioned conditions above I’d need $3.6 million dollars. And of course, my current savings is not enough and I need to boost my investing and savings.

In Summary:

AARP advises that you should aim to have a nest egg of $1 million to $1.5 million for a typical retired American. Another way to look at this is that you need to have 10 to 12 times your current income. According to this rule of thumb pharmacists only needed $1.5 million to retire.

Lastly, according to AARP, certain financial advisers are recommending that retiring at 70% of your current income is not enough. They are recommending you to receive 100% of your current income during retirement. Yikes! How much is enough for pharmacists to retire on?

This entirely depends on your lifestyle. A frugal and investment savvy pharmacist might get by with the conventional recommendation. According to Mr. Money Mustache, you can totally live off of your investment by only withdrawing 4% of your funds on the assumption of a 5% portfolio returns. On the other hand, if you’re planning to retire rich and maintain your pre-retirement lifestyle then you may need to go for the higher end recommendation.

The main point is save and invest now! it’s never too late!

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