What if 1 Million Dollars Isn’t Enough to Retire?
- May 8, 2023
- Financial Planning, Retirement Income, Retirement Planning
If you are headed toward retirement soon, or you have just retired, you may find yourself wondering, “Is my nest egg enough?” It’s a common question and one that causes a lot of people a lot of reasonable anxiety. Because retirement finances are much more about prediction than they are about facts and assurances, it can be hard to feel confident that you will have enough to carry you through your entire retirement. As you know, medical expenses, long-term care, housing repairs, and other unpredictable costs are just a part of life, so how can you prepare for those kinds of things during your retirement?
One thing that may help is getting a sense of what other people have saved on average. Here are the average savings of Americans by age group:
- Less than 25 years old: $6,264
- 25-34 years old: $37,211
- 35-44 years old: $97,020
- 45-54 years old: $179,200
- 55-64 years old: $256,244
- 65+ years old: $279,997[1]
This is just the average though. Your situation may be very different and have very different requirements than another person’s situation. Everyone’s retirement goals, financial situation, and timelines are vastly different, which may require you to cover different costs, opt for different income and investment products, and approach funding your retirement differently than the “average.”
Even millionaires next door have been worrying lately about their retirement because of a year of bad stock returns and unprecedented inflation.[2] Let’s consider a person with 1 million dollars in their retirement accounts. According to traditional wisdom, you want to withdraw 4% of your 1 million dollars in your first year of retirement.[3] This comes to $40,000 a year, which is a much lower figure than most retirees are probably expecting to see. Withdrawing 4% of the average retirement savings of $279,997 is only about $11,000 a year.
It is important to think about your retirement budget and how much you plan on spending in your retirement. You may have to adjust some of your lifestyle choices to reflect this change in income.
If you are feeling unsure about if you have saved enough for your retirement, reach out to us and we can talk through suggestions and options for your specific situation.
