Retirement Planning

How Much Money Do You Need to Retire? – Part 2 of 2

When many of our clients are 5-10 years from retiring, they often ask us, “will I have enough money to live 

David Kenerson

David Kenerson

on during retirement?” Here are the steps we recommend to help you determine if you have saved enough cash to live comfortably when you step out of the work world.

We discussed the first step of this process here. Now, let’s walk through the final steps in this calculation.


Step 2 – Calculate the nominal amount you will need to cover your expenses.

  1. Determine when you will retire. How many more years will you be working?
  2. Assume a standard rate of inflation. We recommend using 3% annual inflation.
  3. Take your expected current dollar needs found in #1 above and compound this number by your selected inflation rate for the number of years until retirement.
    • (Multiply the net amount you calculated in Step 1 by 1 plus the inflation rate expressed as a decimal figure,
    • Take that answer and multiply it by the same amount again for each of required number of years until you retire(e.g. 106.09 x 1.03 = 109.270; $109.27 x 1.03 = etc.)

Example – You need $100 in today’s dollars 5 years from now. Your chosen inflation rate is 3%. The table below shows how many dollars will equal today’s $100 dollars at 3% inflation after each year:

Start End of Yr. 1 End of Yr. 2 End of Yr. 3 End of Yr. 4 End of Yr.5
$        100.00 $        103.00 $        106.09 $        109.27 $        112.55 $        115.93


This table tells us that in five years you will need a nominal amount of almost $116 for every $100 you spend today if the inflation rate runs at 3%.

Step 3 – Determine your Sources of income outside of your personal portfolio.

  1. Contact the Social Security Office and get an estimate of your social security payments at your expected retirement date.
  2. Contact any source of pension(s) to get an estimate of your pension at retirement.
  3. Note the amount of cash income you receive from any rental properties.
  4. Total your expected income for items 1-3.

Step 4 – Subtract your projected expenses at retirement from your Social Security, pension, and rental income at retirement.

  • If your total is positive, you don’t need to worry – your income is greater than your expenses. Congratulations!
  •  If your total is negative, your portfolios – IRA’s, 401k plans, profit-sharing plans, and portfolios held outright – must produce.
  •  Add up your total investment portfolios. If you earned 3%, 4%, or 5% on today’s portfolios, would any of these incomes be enough to offset the shortfall of social security, pension, and rental property income and cover your expenses? If they are sufficient then, again you probably are okay.
  • If your total is not sufficient to cover your expenses, you will need either to consider increasing your investment returns to such a rate that your portfolio (by your retirement date) will grow to a sufficient size to cover your expenses or plan to cut your expenses at retirement in such a way that the available income covers those expenses. Seeking higher returns implies taking greater risks: you will want to consult your investment advisor to determine whether obtaining such returns is feasible and most importantly can be done within your tolerance for risk!

Planning for your retirement future can be a daunting task, but if you follow these simple steps and plan accordingly, you can expect that your retirement years will be the most stress-free, relaxing, and fun years of your life.

If we can assist you with your retirement planning, please contact us at david at or (757) 962-7976. 


Retirement Planning

How Much Money Do You Need to Retire? – Part 1 of 2

David Kenerson

David Kenerson

When many of our clients are 5-10 years from retiring, they often ask us, “will I have enough money to live on during retirement?” Here are the steps we recommend to help you determine if you have saved enough cash to live comfortably when you step out of the work world.

Step 1. Determine your monthly financial needs today by examining your expenses.

Go through your checkbook and allocate your expenses among the following categories, using an Excel spreadsheet or another simple organizational tool to record the expenses.

  • Housing – What are your monthly mortgage payments? Monthly utilities? Cost for home repairs and cleaning services? Yard equipment and maintenance? Pool equipment and upkeep?
  • Automotive – What is your monthly cost for insurance? Fuel? How much do registration fees and licenses cost? What’s your annual average for car maintenance and repair?
  • Personal – How much do you spend per month on clothing, personal care products and services (hair cuts, dry cleaning, manicures, laundry service, etc)?
  • Food and Drink – What is your average cost for groceries each month? Alcohol? Home care products like furniture polish, kitchen cleaner, etc?
  • Entertainment – On average how much do you spend per month for movies, concerts, travel, etc?
  • Second Home – What are the costs above for your second home, if applicable?
  • Taxes – What is your average federal income tax each month? State tax? Local tax? Social Security and Medicare taxes? (Use last year’s tax return for figures and then divide by 12 to get the monthly cost.)
  • Gifts – On average, how much do you spend on gifts each month?
  • Medical – What is your monthly cost for doctor and dentist visits? Medications? Medical devices (glasses, hearing aids, etc.)?
  • Hobbies – What do you spend each month on items related to your hobbies such as sewing, fishing, gardening, etc?
  • Charitable Gifts – What is your monthly average for charitable giving – including cash and checks?
  • Miscellaneous – What else do you regularly spend money on but that isn’t included in the categories above?

2.      Add any monthly credit card charges from all your credit cards to the total above.

3.      Total all the columns.

4.      Deduct expenses you won’t have during retirement.  If your expenditures look to go down after you retire, you might consider using a percentage of your current spending – i.e. 70% of your current monthly expenditures.  Think carefully here though because while you might spend less money, for example, on gas for your commute, you may spend more on things like travel or hobbies.

5.      The net total is what you can expect to spend per month in retirement in today’s dollars. (Keep in mind that today’s dollar will not be worth as much tomorrow.)

Come back next week for Part 2 of how to calculate your needed retirement totals.

What We're Watching

Paying Attention: the 3-D Printing Industry

By Niklas K. Oskarsson and David R. Kenerson, Jr.  

3-D printing is a fast evolving industry with high margins serving a wide range of customers. Current printer prices range from around $300 for home devices to six digit price tags on high end industrial machines. We expect the industry to grow roughly at a 30% annual clip through the end of the decade with the leading firms generating gross and net margins in the 50% and high single digit ranges, respectively, over the next few years. Slicing the major players revenue streams into three segments, we foresee their printing materials producing the best margins going forward since the companies are effectively reducing competition by eliminating printer warranties if materials from other manufacturers are used. Within the print on demand segment we suspect the industry leaders will find it more challenging to defend their margins since these services can easily be replicated by any store with 3-D printers. Finally, we also anticipate the competitive landscape to tighten within the printer segment as Hewlett Packard and other major corporations enter the industry.

Having said that, with the entrance of large cap, cash flooded technology companies, specu-lative take over premiums may creep into the existing pure players’ valuations and it may also raise the overall awareness of the industry. Moreover, the fact that firms such as Siemens, GE, and Boeing are already using 3-D printers to produce anything from turbine parts to fuel nozzles adds credibility to the industry as a whole and hints at its potential to become a real disruptive force.

Until the printing speed accelerates and material costs come down, we don’t expect additive manufacturing (3-D printing) to challenge subtractive (traditional) manufacturing for mass produced products. Instead, we anticipate additive manufacturing utilization to rise significantly within the prototype, one-off, replacement, low volume, and customized part type of production. As a result, the end markets best suited for 3-D printing are the healthcare, aerospace, and automobile parts industries. 3-D printing eliminates, for example, the need to store old model replacement parts for automobiles and airplanes. Within healthcare, already more than 90% of all hearing aid shells are 3-D printed and in the dental field braces and crowns can now be 3-D printed. Knee and hip components are also being 3-D printed and scientists forecast that the actual printing of human organs may only be a decade away.

Other important benefits of 3-D printing are that it reduces the need for retooling of machines, minimizes the percentage of the original raw materials that are turned into scrap, and can improve the quality of the products produced. According to GE, the subtractive (cutting and drilling) manufacturing process it previously used to produce certain metal parts required almost 2.7 times more raw material inputs than their current additive manufacturing techniques. The company also estimates that it is able to make parts that are five times more durable and significantly lighter using 3-D printing machines than previous manufacturing techniques.

It’s worth keeping an eye on this growing industry, and the companies that enter the market.


The information based here represents the judgments and opinions of the management of Virginia Global Asset Management and not intended as financial advice.