Are you saving for retirement? Better yet, are you saving enough? Self-employed musicians—studio teachers and gig performers, especially—often make barely enough money to get by. You may have a bit stashed away for an instrument or bow, or take the occasional vacation. But do you have savings to cover an unexpected event 20 or 30 years in the future? Not many musicians do. Nevertheless, retirement saving should be one important part of your monthly financial planning.

Bills to Pay
The current climate in America gives the topic of retirement a sense of immediacy. Changes to Social Security are being considered and words of caution (sometimes doom) appear frequently, indicating that retirement ages may need to be raised or benefits cut to keep Social Security solvent past the year 2030.

For some, retirement’s distance from the present creates difficult-to-imagine scenarios, but bills do not “go away” with retirement. I’ve listed the most likely expenses a retiree will incur:
• Medical insurance premiums and drug expenses not covered by insurance or Medicare
• Medical costs are estimated potentially to double or triple over the next 20 years if Medicare is not changed by the government
• Taxes, including property taxes and income tax upon any distributions of tax-sheltered annuities saved earlier in life
• Mortgage costs (many retirees will not own their homes outright at retirement)
• Utilities (heat, water, cable, phone, and so on)
• Food
• Entertainment and travel
• Supporting other family members
• Costs of vehicles
• Other miscellaneous costs

A Dime a Day
Combined, these expenses can squeeze an insufficient retirement nest egg. How much does one need to save? A rule of thumb suggests one needs $250,000 saved/invested for every $1,000 of monthly income needed in retirement if one intends to live principally on interest income. (One needs less if the intent is to draw down the principal over time.) Thus, if projected expenses from the above list might average $4,000 per month (or $48,000 per year—a modest middle-income living), a person or family will need to have saved $1 million during employment to cover that lifestyle.

In order to achieve $1 million with a constant 10-percent rate of investment return over 40 years of investing, you need to invest only $156 per month. If that rate of return drops to 4 percent, you will need to invest $850 per month for the 40 years! I use the ultraconservative 4-percent return, believing that well-placed investments may earn an average of 6-to-8-percent return, but inflation may reduce those returns by 2 to 4 percent.

Calculating Costs
Let’s get to the heart of the matter: how much do you need to save, for how long, and how can you manage it? First, let’s assume that you are a single-studio teacher who also plays some gigs for a living, you’re reading this article at the fortunate age of 25, and you have 40 years until expected retirement. You want to save a reasonable $500,000 in retirement income, which would give you $2,000 per month in retirement income. (Any income from Social Security, inheritance, and so on, would be additional.)

You teach 30 lessons per week for 45 weeks of the year (allowing for some vacation and sick time annually), and charge the very reasonable rate of $30 per one-hour lesson (in some cities this rate would be too inexpensive, and in some smaller locales $30 might be considered expensive). I will also assume a 25-percent tax bracket for ease of calculations.

In order to save $500,000 over 40 years, you will need to save $500 per month for ten months of each year to build $5,000 per year, which at the ultraconservative 4-percent return will yield almost $500,000 in 40 years.
• 30 weekly lessons x 45 teaching weeks x $30 per lesson = $40,500 annual gross income from lessons.
• 25-percent tax bracket means that $10,125 in taxes need to be saved annually to pay the government, leaving $30,375 as net income.