I was testing out Chris Hogan’s popular ‘Retire Inspired Quotient’ (R:IQ), which is essentially a retirement IQ calculator. You plug in what you consider your dream retirement (family, travel, hobbies, relaxation, etc.), your current gross annual income, how much you need right now monthly to retire, and then your current savings.
The retire inspired quotient tool runs a calculation based off all of your parameters to generate your “R:IQ” number, e.g. the amount of money you need in order to comfortably retire based off everything you just laid out previously. It also tells you how much you should be investing monthly in order to hit your desired retirement age and “R:IQ” nest egg number.
12% Market Returns…Really?
This is a pretty cool retirement calculator, however, it skews on the very high returns side. I think Chris Hogan, famed Dave Ramsey “retirement” personality”, leverages this retirement IQ tool to be more inspiring than factual. The only reason I say that, which is the same reason I am very critical of Dave Ramsey’s investment advice, is because they assume a 12% return, ALWAYS. They automatically assume you can and will get those returns. They essentially say you can beat the market every single year year, considering the stock market has historically returned approximately 10% for the last 80+ years.
With that said, the retire inspired quotient (R:IQ) tool is still very functional. I simply modify my number by accounting for a more modest return…not 12%. You too can play with that percentage return and use something more like 7%, 8% or ever 10%. But 12% is extremely optimistic.
Retire Inspired Quotient
Without further ado, below are my personal retire inspired quotient (R:IQ) results. Based off Chris Hogan’s tool my wife and I are in a pretty good spot. The R:IQ says I need $3.36 million dollars to retire by the age of 55. In order to hit that mark I must save $1,626/month for the next 18 years. All of that is great to hear…and this is based off a 10% return, not 12%.
What is even more encouraging about all of this is the fact that my wife and I collectively save significantly more than $1,600 per month. We sock away a lot of money each month for retirement. We both max out Roth IRA’s and I have a 401k with company match and profit sharing. So even if we get returns more in the 7-8% return, our monthly savings should help make up that gap.
Millennials, what is your retire inspired quotient?