How much money do I need to retire? is a question many people wonder about but only a few can answer. Busy with their daily lives, people often neglect its importance until it is too late.
If you do not wish to retire to a measly, or perhaps non-existent, state pension, you have to take matters into your own hands. Yet financial education remains grossly neglected in schools. Thankfully, books like How Much Money Do I Need to Retire? are there to help you.
I was kindly provided with a free copy of the book in exchange for my honest opinion.
This post contains affiliate links. Should you make a purchase or sign-up through my links, I will receive a commission at no extra cost to you.
Table of Contents
How Much Money Do I Need to Retire? Review
How Much Money Do I Need to Retire? Uncommon Financial Planning Wisdom for a Stress-Free Retirement was written by Todd Tresidder. Todd is a financial coach, as well as the owner of FinancialMentor.com.
On 236 pages, the author explains how you can estimate the amount of money you will need to save for your retirement. The book is aimed at people without a financial background and contains a glossary explaining difficult terms.
It aims to equip people with the knowledge to retire comfortably without relying on outdated pension systems. Or as Todd puts it:
The evidence is overwhelming that something is wrong with traditional retirement planning. It’s an old-world model in need of a major facelift.
Of note, How much Money Do I Need to Retire? is an American book. However, unlike most financial books, it does not focus on the practical steps leading to retirement which differ between countries. Instead, it focuses on the concept of retirement and, therefore, all parts of the books are relevant no matter where you are located.
How Much Money Do I need to Retire? Structure
The author takes a three-model approach to retirement. In Todd’s opinion, one model cannot accurately predict reality. Three models, taken together, are more likely to reflect reality. Each model is explained in a separate section of the book:
- Conventional retirement planning, the smart way (model 1)
- Lifestyle planning, the creative way (model 2)
- Cash flow planning, the simple way (model 3)
Model 1: Conventional retirement planning, the smart way
The first section of How Much Money Do I Need to Retire? revolves around model 1 and takes up around 75% of the book.
Todd explains that all retirement plans are based on a model. And models, in turn, are based on assumptions (or questions). Yet there is an inherent problem with this approach.
Retirement calculations require accurate answers to these […] questions to provide you with precise savings and spending goals for retirement. Yet none of these questions can be answered accurately. Clearly, there is a fundamental problem with the entire process.
To avoid messing up your retirement by relying on incorrect models, Todd shows us how we can create a personal spending plan, reduce risk, and deal with inflation which could be the biggest threat to our plans.
How to account for unpredictable variables
Todd places particular emphasis on the fact that inflation is hard to predict. And indeed, inflation rates are variable, as the past has shown us. Neglecting this fact could kill your retirement savings.
Among other questions, Todd highlights that nobody can correctly answer is how long they are going to live. However, How Much Money Do I Need to Retire? reveals ways to plan for unknown longevity.
Furthermore, Todd points out that assumptions made by financial advisors regarding retirement are often oversimplified. His statements and observations encourage us to understand the rationale for his reasoning.
Intuition would indicate that you should be able to safely spend your investment return, right? Wrong.
How Much Money Do I Need to Retire? continues to explain how we can estimate investment returns and why the popular 4% rule and other Monte-Carlo simulations are flawed.
Calculate how much money you need
In the last part of section 1, we finally learn about the first model Todd uses to calculate the amount of money needed to retire. Additionally, we also learn how to build confidence in our plan.
Model 2: Lifestyle planning, the creative way
The second model is much shorter than the first and spans about 20 pages. It deals with modifying our lifestyles so we can retire earlier than normal. Unsurprisingly, the savings rate is a big part of this. In How Much Money Do I Need to Retire?, Todd highlights ways to skyrocket our saving rates while still living happily.
Model 3: Cash flow planning, the simple way
In the last, and shortest, model, Todd reveals his secret to retiring at age 35, the three rules. These rules can be applied to anyone’s life. Hence, it is possible for anyone to retire early, although the time frame varies according to our personal circumstances.
Free downloadable guidebook
With the purchase of your book, you also get access to a free guidebook that you can download separately. This can help you map out your journey to retirement.
How Much Money Do I Need to Retire? Review summary
Overall, How Much Money Do I Need to Retire? was a thought-provoking read. The author goes through great lengths to explain why we cannot rely on financial advisors and I wholeheartedly agree with Todd.
Furthermore, the book teaches us the concept behind a sound retirement strategy and how to avoid pitfalls. This is really important and useful knowledge, especially for people without financial education.
One thing How much Money Do I Need to Retire? could improve is its structure. After the long build-up of model 1, I expected some ground-breaking and game-changing calculations for the amount needed to retire. Instead, the book goes back to the 4% rule.
For people without a financial background, the 4% rule is indeed ground breaking and game changing. However, this information is available for free online, including on Monethalia. The same is true for other aspects of the book, for example living frugally and reducing your expenses.
Financially savvy people will be able to find most of the information presented in the book for free. But the majority of people do not bother with finances to that extent. Therefore, How Much Money Do I Need Retire? is a great gift idea for people in need of a wake-up call regarding their pension. I think we all know someone like that!
You can buy How Much Money Do I Need to Retire? From Amazon for £12.38 (paperback) or £7.85 (eBook).
If you like this post, help Monethalia grow by sharing it on social media using the buttons below. You can also sign-up to my newsletter by entering your name and email address into the fields in the sidebar.