No matter where you are in your career, chances are you’ve wondered the million dollar question, ‘how much money do I need to retire comfortably?’
However, this can be a difficult figure to pinpoint because the answer is often, ‘it depends.’ In recent years rising healthcare costs, evaporating pensions, and longer life expectancy have heightened uncertainty around retirement planning. Never-the-less, crunching the numbers now can help you prepare for your retirement
so that you can enjoy the golden years without the stress of out-living your money.
By the numbers: According to a recent survey, the average American believes they need $1.7 million to retire (cnbc.com). This may seem like an intimidating number to those just starting out, but it’s actually on par with the age and median salary across the country.
However, many Americans are falling short of this number, according to Nathan Voris, managing director at Schwab Retirement Plan Services. Over half of those surveyed stated that they contribute less than 10% of their salary to their 401(K) with an average contribution of $8788 annually.
What’s more, only 42% of US workers have done retirement calculations, according to a new study by the Employee Benefit Research Institute (https://www.cnbc.com/2019/04/24/are-americans-overly-confident-about-retirement.html). And less than a third of those surveyed factored medical expenses into their calculations and even less have a detailed plan for their retirement.
Quote: “It’s a little bit of denial. We have so many retirement calculators on the internet and resources trying to help people with their ‘rules of thumb.’ People feel like they are so far behind, the solutions are beyond their reach and they’d rather not face it” – Liz Miller, founder of Summit Place Financial Advisors
What does this mean for you?
Your retirement number is largely based on your current income and the standard of living you want when you retire, but there’s a lot more that goes into it. Don’t even know where to start? Most experts agree that your annual retirement income should be roughly 80% of your pre-retirement salary in order to live comfortably.
Another rule of thumb recommends that you project your yearly expenses in retirement and multiply that by 25 to get a ballpark figure of how much you need to save. But no matter which method you choose, establishing a benchmark for savings is the first step to building your retirement nest egg.
