You’ll need this much money to retire

By Altelisha "Lisha" Taylor, MD, MPH
Published December 5, 2023

Key Takeaways

  • By calculating your current net worth, you can figure out how much money you will need to retire—and whether or not you’ll be able to retire early.

  • Adding up the value of your assets and subtracting your total debt will reveal your current net worth.

  • You’ll know you’re ready for retirement when your net worth is equal to 25 times your current annual expenses, and consistent saving and smart investing will help you reach your goal faster.

Whether you are in the early stages of your career and still in training, or in later stages contemplating retirement, or somewhere in between balancing work and family, it’s important to understand where you stand financially. 

By calculating your net worth, at any stage of your career, you can figure out how much money you’ll need to save to live out your golden years in comfort.

Figure out your net worth

Your net worth is the total amount of money you have. It includes money you have access to as well as the monetary value of the things you own—cash in the bank; the total amounts across your investment accounts; and any assets, such as the home you own, your car, and other valuable items. 

Your net worth also factors in the remaining balances on any debt you have to repay, including your mortgage and student debt. In short, your net worth is your assets (cash on hand and things you own) minus your liabilities (financial obligations and debts). 

Grab a calculator

You can figure out your net worth by first logging into your bank accounts and writing down the total amount of cash you have across all accounts. Include any money in savings accounts, money market funds, online banks, and similar.

Then, log into your investment accounts and write down the total value of your stock market investments. Include any money in your work retirement accounts, like a 401k or a 403b. If applicable, add to your calculation the money in your Roth IRA or traditional IRA, along with money from your health savings accounts, 457b accounts, and the guaranteed amount from any pensions. 

Related: Retirement investing: Everything you need to know

Write down the value of any other types of investments you may have. Are you the partial owner of a business or a medical practice? If so, estimate how much your percent ownership is worth. 

Do you have stock options or common stock from other individual investments or a prior job? If so, write down the fair market value (current worth) of those shares. 

Lastly, think about any other assets you may have and write down their value. Do you own a home, or several homes? If so, write down the total current value of each one—if you’re unsure, look up your home on Zillow or Redfin for an estimate. 

"Do you own any expensive jewelry, cars, watches, art, handbags, or other collectible items that you could sell for money, if needed? Write down the value of those items as well."

Lisha Taylor, MD, MPH

Once you know your assets, you need to determine your liabilities, usually in the form of debt. Are you still paying for the mortgage on your home? If so, write down the total mortgage amount you have left. Do you have any credit card debt, personal loans, car loans, or student loans you have to repay? Record the amounts of each one. 

Related: Is it wiser to buy a home or keep renting?

Next, write down any remaining financial obligations you have. Did you sign a contract to pay for your kids' daycare for the next 12 months? If so, write down that total cost. Did you pay for furniture in installments over time? What is the total amount you still owe? 

Add the total value of all your assets and subtract the total amount of your financial liabilities. What you have left is your net worth.

Related: Trends in medicine that may affect your compensation

Best practices for increasing your net worth

Knowing your net worth tells you how much money you have to live on if you were to quit your job today. It also tells you how close or how far off you are from certain milestones. 

"Do you want to retire a multimillionaire? Figuring out your net worth will tell you how close or how far away you are from reaching that goal."

Lisha Taylor, MD, MPH

Many doctors, especially those who are in the earlier stages of their careers, may discover a disheartening fact: Their net worth is negative. Perhaps you are part of the 70% of medical students who take out loans for their education and graduate with six figures in debt. 

If so, this shouldn’t be a cause for alarm, because you aren’t alone. The majority of physicians today have to borrow for their education, which means they spend the majority of their 20s and a good portion of their 30s with a negative net worth. Thankfully, this doesn’t last forever. 

Once you finish your training, your pay increases substantially, which will allow you to do these three things to improve your net worth: save money, invest money, and pay down your debts. 

So, how much will you need to retire?

Based on research done on retirement investing by the Trinity Study, a person needs their net worth to be about 25 times their annual yearly expenses to retire.[] This person should also be able to safely withdraw 4% of their savings each year in retirement (adjusting for inflation every 30 years).[]

To figure out what your net worth should be in order to retire, you should first calculate your estimated annual expenses in retirement. This should be based on what you’re spending now.

First, figure out how much money you spend each month out of your take-home pay. Exclude any money spent on taxes, savings, and investments and only factor in the money you spend on food, healthcare, housing, travel, transportation, and other incidentals. How much does this add up to each year? Once you have the amount, multiply the number by 25. This is the net worth you would need to be able to retire in your 60s. 

For example, if you and your family spend about $100,000 each year, then multiply $100,000 by 25—this equals $2.5 million. This means you should be able to comfortably retire when you reach a net worth of $2.5 million. 

Related: From residency to retirement: How compensation changes over a physician’s career

While the number may seem large now, consistently investing, saving, and paying down your debts will help you make significant progress toward that goal.

What this means for you

While you may be many years away from retirement, it’s important to spend some time now determining your current financial status, and how much you will need to maintain your lifestyle once you retire. Calculate your current net worth by determining the total value of your assets and subtracting your liabilities. Then, figure out your retirement financial goal by multiplying your current annual expenses by 25. Saving consistently, investing wisely, and paying down your debt will help you increase your net worth each year and get you closer to your goal. 

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