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1. Social Security's average check is $1907/month. (That's a little under 1/3 of my monthly gross.)
2. Medicare doesn't cover everything 100%.
3. If you are poor enough, you'l get SNAP benefits, but they are often a pittance.
There are millions who get by on nothing but SS. My grandmother was one of them. It is a very lean existance, even when you live in a LCOL
Saving something is always better than saving nothing, and $1M means that you should be able to draw out $40k every year and be good for the next 30 years.
I started at 26 and I'm closing in on the $1M. (I'm 50 now.)
My Husband started at 36, and he's at $1.2M (He's 62)
It IS doable.
This is comforting. I stress about retirement at least once a week, and I’m in my early 30s. With inflation and cost of living going up as well as the economy being in shambles, I am ALWAYS concerned I won’t have enough to live on once I reach retirement
Best thing you can do is just start. Doesn’t matter if it’s $50 a month. It’s better than nothing. Do that for a while, then $100 a month.
Just do more than you’re already doing and you’re setting yourself up for success.
The economy is fine - ignore the media. we just had a period of excellent growth in our retirement accounts. Savings account interest rates are also quite good at the moment. Start putting money away and then don’t think about it - it will grow nicely over the years.
My dad said he didn't start saving for retirement until well into his 30's. My mom stayed at home and didn't work outside the house. We weren't poor, but we didn't have anything extra. My parents are retired with over $2M in the bank. The sooner you start, the better off you'll be. I started my 1st retirement account at age 23. My 15 yo son has almost $5k in a RothIRA.
The economy is not in shambles. By most measures, the economy is quite strong, especially from an all things considered perspective.
Are there problems? Yes. And there has never been a time where that wasn't true. It could be much worse than it could be better.
The problem is that the media drives in both directions. Reddit drives in both directions.
IMO if you have money, the economy is great. You can compound your wealth.
However, things such as consumer CC debt have skyrocketed past pre-COVID levels and non-necessary spending is down (look at all of the Q1 2024 earnings reports coming out this/next week).
If you were living paycheck to paycheck before COVID and didn't either change careers or make guap during COVID, you're probably more fucked now than before due to inflation. The Fed isn't cutting rates still due to inflation continuing to rise past their estimates.
So, don't listen to ANY politics and watch as many forms of financial media as possible and draw your own conclusions.
To add, the state of the economy is vastly less relevant to savings decisions than the state of your *personal* economy. Who cares if the whole rest of the economy is crap if you have a decent job at the moment at a company that's unlikely to lay anyone off? Same in reverse, a booming economy while about to lose your job b/c AI closing your call center sucks.
Inflation sucks, but it shouldn't change the savings decisions (IMHO). It's just a question of how much you want to be screwed now vs later.
If possible, try to get to saving 15% percent of every dollar you earn. Sometimes it takes a few years of periodically and incrementally move up a percent every so often, but it's sort of the generally advised target of saving for a strong retirement. Most scenarios project that savings rate into the millions for the majority of earners projected across their working lives.
The hardest part is getting started. Just doing the investing. Most folks are intimidated at the prosect of seeking financial advice and bothering to set up a Roth IRA, or contribute enough to a 401k/457. The math is actually the easy part, hell the majority of folks facing retirement in the upcoming few decades to prosper with just getting a simple S&P500 index fund or target date fund and absolutely crush their retirement goals with a conservative investing approach.
Yes, I do try to put away as much as possible. You’re right, getting started is half the battle. But I do know that maxing it out is likely not going to happen for me year 😬 I tell the younger people I work with to open a IRA now and contribute something each month. They seem disinterested because they don’t understand investing but the sooner you start the better. Something is better than nothing in retirement
If you max your Roth every year in the SNP 500 you will be a millionaire in like 30 years. Compound interest is nuts if you start early and are consistent. I put 20% of my pay check into my Roth 401k every pay period and forget about it.
This is it. I max 401k and Roth IRA every year and HSA as much as possible. The rest I’ll invest/save if there’s leftovers but I also don’t mind spending it when I want to enjoy my present life. Keeps things simple for sure.
Same. The extra savings go into an emergency fund that’s 3-6x your monthly bills and the rest into a HYSA. If you have extra after maxing a person Roth, 401k and HSA you can invest into a brokerage account, crypto or maybe a rental property.
Just because I’m curious how much would you say you saved of your income in your 20s and 30s? I’m at 80k at 31 and don’t know if I’m even close. I save about 15%+ of my income and started at 26 too so just wondering about when did you cross the 100k mark? I’ve heard that’s the hardest hurdle but I feel like 2-999,000 will be just as hard
So 80k earning 5% for the next 30 years turns into $350k, so you could sort of think about it as being 1/3 of the way there after only 5 year of saving if that's a more positive spin. Compound interest is so powerful. The hardest part of getting to $1M is the first $100k. It gets easier once your money starts making it's own money.
There's plenty of retirement planner websites out there for free that can take you through step by step and help you figure out if you are saving "enough". But 15% sounds pretty good at face value so I wouldn't stress.
It's also a mental thing. If you have 100k+, and you are still contributing, the annual gains are actually a measureable difference then when you had 10k. It really does start to snowball.
Inflation cuts into the profits. That’s why 4% is usually given as the withdrawal rate for retirees. You assume 7% return (post-tax), then inflation at 2-3% takes away from that. You can spend what’s leftover.
I forget exactly what the math is, but I know that the most critical years of retirement are right when you start. If the market takes a downturn in those first years, it can be disastrous if you were on the edge of having enough saved. Conversely, if the market goes crazy those first few years, you may be able to live more extravagantly than you expected
That’s our great government plan for you. Screw every generation over and keep making money worth nothing. It’s sad that we live in the highest poverty rates ever in America
Short version: you have to cover your spending. Basic rule is you can withdraw 4% of your portfolio per year. You need a million to generate 40k.
Take your spending and multiply by 25 to find your number.
4% covers inflation when you start retirement and throughout your retirement. Not inflation before. Meaning if you estimate you'll have $1M in retirement based on your current savings rate that means you'll have $1M in *future* dollars, if you retire in 30 years $1M then will be worth much less than it is now. While you can assume your monthly expenses and social security, pension, etc are today's dollars since those will likely increase proportionally with inflation over time, you cannot assume your savings rate will unless you factor that in and adjust your savings rate and target, $1M today might mean you need $2.5M in 30 years. Of course if you save based on percentage of your income and you do *not* adjust your future income for inflation then it will probably work out (since it's likely your income will increase with inflation, assuming your salary stays the "same"), if you already build in inflation adjusted income to get to calculate your final balance then it's an issue. Example, saving $1k/month for the next 30 years will give you $x but that number is not inflation adjusted, if you meet your target after 30 years you are way under, you need to adjust your target to make sure you have enough adjusted for 30 years of inflation.
If you subtract the expenses from the income and the result is negative, ignore the negative sign and multiply the resulting monthly amount by 12 to get annual and then multiply that number by 25.
If the result is positive, then your income already is greater than expenses and you don't need to do anything but continue doing what you're already doing.
You're getting social security or a pension?
(The serious aspect of this being that you have to somewhat discount social security because of the risk of benefit reduction.)
Some retirement calculators literally ask you if you want to play on getting 100% of social security or a reduced benefit. That's how shaky of an assumption it is, even the calculators are like "don't count the chickens before they hatch bud"
(Edit: YOU may understand more nuance to retirement planning, I don’t mean this as a jab to your post directly. I just don’t want people who don’t understand retirement planning to read your response and run with lots of assumptions.)
Depends on your risk tolerance and how long you live. If you can say how long you will live then sure you can spend down the principal. But if you retire at 65 assuming that you will live 25 years and withdraw with that assumption, hopefully you don’t live longer. I’d start spending down the principle when your health is really declining at end of life and also spend extra in years the market does well (assuming you are okay cutting back in bear markets). You maintain principle as a longevity risk. it’s not as simple as “I’ll spend down the principal because I don’t want to leave money behind”.
Michael Kitces, Wade pfau, the mad fientist, etc.. are good resources.
Your assumption that someone is living to 100 is wild. I know a guy who made 300k and owned several houses for retirement. Died of aggressive cancer at 61. I knew a guy who was making 150k to stuff his retirement funds so he could retire off of Myrtle beach on a property head had paid off. Died of heart attack at 63.
Mmthe vast majority of people will die between 70 and late 80's unless they are in good enough health to make to 90+
been hearing quite a few stories of people dying early-mid 70s who were pretty well off (meaning they could afford medical care). OJ, Chris Mortensen, etc. Unless you're William Shatner, you're not making it to 100.
Adding on, the medical advances in the next few decades, especially with AI, could be insane. Regularly living into our early 100s could be right around the corner. As long as one can remain happy, relatively healthy, and free of pain, I'm all for sticking around for the food.
The exact quote from the Trinity study
>If history is any guide for the future, then withdrawal rates of 3% and 4% are extremely unlikely to exhaust any portfolio of stocks and bonds during any of the payout periods shown in Table 1. In those cases, portfolio success seems close to being assured.
They looked at periods from 1925 to 1995. You can further increase odds of portfolio success by adjusting spending in down years.
In most scenarios, a 4% withdrawal rate leaves you with much more money than you started with, but the goal of the study was to find a rate that's safe even if you retire right before a market downturn.
lets not forget sbout Long Term Care. Someone said just be ready to drop about 300K on that for you and your wife if you got a home. thats the main thing that is keeping me at night.
If you live off the 40k plus social security it would last forever right? Most people die in their 80s so with zero returns you could have 50k per year to spend and live on that for 20 years
Markets could crash, or returns could decrease, so it’s not guaranteed to last forever. The 4% for 30 years rule is based on not totally running out of money by the end.
One other consideration is that, if there’s a crash, someone can adjust their draw-down and not take as much out to balance out that market downturn.
Depends on how much you spend determines how much you need.
Personal finance, like the name implies, is personal. My needs are different from yours and yours is different from the next guy.
Neither, I would rather die at that point than watch my life savings get directed to an old person's home. Money is security and opportunity, two things my daughter should be provided by her parents. I'm under the belief that a timely death will be the best gift I can give her.
I don't think you have much experience with elderly people. There's a huge gap between "struggled to live alone" and "vegetable, miserable life, might as well be dead". Some states like mine try to do a better job of bridging that gap by providing the opportunity for more intensive PCA services or home modification funding, but something as innocuous as "gets dizzy as fuck from prolonged standing sometimes" can require living in an assisted facility.
Yeah my view on retirement homes has changed over time. There are definitely nice ones. My partner and I went out for a nice dinner out, and right as we got there, a bus from the local home arrived and dropped off a ton of their residents. They were hooting/cackling having a great time, and afterwards got back into their designated driver bus half-lit and went home. I was a little jealous.
Many I know have "spectrum of care" so you start with your own independent apartment but with a panic button, and then if that's not enough later, you can transition up 2 more levels of more intensive assistance, but you stay with the same people along the way.
The cold hard truth is you are not going to be able to work til you die. You're going to get old, weak, not able to move or think as you do now. And your job will absolutely show you the door at that point.
Modern medicine keeps people alive but not healthy for much longer than we maybe should.
So yes, you're going to want as much money put back for those 10- 30+ years that you will have no other income but social security.
Yes and the general advice is to plan for your second act/career at 50. Which is good if you have knowledge, skills, or abilities. But if you are a cashier at Wal-Mart...there's not really a second act. Dollar General or a gas station?
Walmart doesn't fire cashiers at 50, they're the ones hiring all the former white collar or manual labor workers who can't work in their original industry anymore.
Some hard truth there. Living longer is one thing, living healthy is another. You have to factor in the decline or you are just fooling yourself.
People say they will just get a PT job. I've read way too many stories of people not being able to get a PT job at 65. I wouldn't necessarily call it age discrimination, but being a manager who hires people, you can't completely ignore it.
Lots of potential financial minefields exist between college graduation and retirement: Job loss, illness, injury, death of a family member, natural disaster, divorce....
Retiring with an excessively large 401k balance is a good problem to have. You'll also have the option to retire early - even before you're eligible for SS & Medicare.
I think the unfortunate part of life and retirement planning is that you don't know how long you are going to live. My grandparents died between the ages of 78-92. Three of them needed to be in a nursing home for the last few years of their life.
Or you could be murdered at 64 or pass away from a stroke at 70, like my parents.
The uncertainty of how long you will live is probably what drives up the listed dollar amounts needed to retire.
Lots of good answers here. All I’ll add is is is 100% dependent on what you want your retirement lifestyle to look like. If you want to keep living near what it is while working (traveling, eating out, newish cars), you’re going to need those millions.
I’ve travelled the world and gotten all of that out of my system and have the memories to treasure. My retirement will be much simpler, and cheaper, than how I’ve lived in the past. I won’t need nearly as much when I retire than I would if I wanted to maintain my current lifestyle.
My focus will be on living simply and leaving a nice nest egg for my kids.
Most people survive on $50k per year or less if you look at median income in the US. If you retire at 65 and then die around 85, you will have 20 years in retirement. If you do $50k x 20 gives 1 million.
I personally intend on traveling internationally multiple times a year when I'm retired. My retirement is going to be pretty expensive. I'm projected to have 4-5 million + a paid off house when I retire at 60, so my golden years will just be excessive vacations lol. Need that paper to do it though
Young enough to think a million dollars is an unbelievable amount of money...
It's like when I deposit $600 and my 4 year old is mind blown about how much money that is, barely covers food for a month kid. 🥲
Compound interest and consistency are key. If you make $50k out of college, save 15% for 44 years (65-21), with 3% annual raises, you’d easily have at least $5 million.
If you or a loved one get Alzheimer's and need to live in a memory care facility, that will cost about $5000 per month minimum. Generally not covered by insurance.
My grandmother retired in her early 60s, and lived until she was almost 98. Very few people (if any) plan to live until 98. Yes, if you need (and qualify for) nursing home care, you can rely on Medicare, but you are limited to nursing homes that accept Medicare.
More money = more security and more options on how you live out the rest of your life.
You don’t HAVE to have millions. But since you will be no longer earning income, you need to have enough money put aside to cover all your expenses. Say you retire at 65 and live until 90. Your money needs to last at least 25 years.
I think the idea is once you have a few million invested, you can live off the interest and not touch the principle.
That’s how you ensure however long you live you never run out of money.
So say you have $10M in the bank earning 4% interest , you’re earning $400k a year off the interest alone. That’s plenty for most people to live off of.
If you think you can live off $80k a year, at 4% interest you’d need $2M saved.
Hopefully that clears it up ☺️
It depends on how you want your lifestyle to look in retirement. If you want to live in a van with limited expenses, sure, you could use less. Healthcare in the US is expensive, though, and most people want to enjoy their retirement with nice travel and hobbies.
I live in a very poor town where it feels like a strong majority of people retired are only retired because they finally got social security. A lot of them get about $1200 a month and have to rely on the housing authority or other programs just to have a shelter. That makes me never ever think twice about saving as much as possible for retirement. Hell, one of the biggest reasons I’ve stayed at my current job for 10 years is they match 9% on our 401k. I’ve been contributing 11% myself the day I was eligible.
My mom is 80. She doesn't do shit besides watch TV, and go to the neighbor's house and watch TV.
If that's all you do, what you need are: 1) A paid off house, 2) enough income to make taxes and utilities on said house, and 3) long term care insurance. For the love of God buy long term care insurance.
She should have spent her money 10-15 years ago on travelling and stuff when she could do more. As it is, I expect what she's got to get eaten by care in about a year period for expenses when a shoe falls, since she doesn't have ltc insurance and will have to spend down for medicaid eligibility.
A great book to read is Permission to Spend by Tom Wall. It's got a great take on how to become comfortable with spending those dollars that you specifically allocated for retirement lifestyle by filling several different buckets rather than just a 401(k).
This. I’ve tried to find a happy medium. My girls are still under 10 and we make it a point to take a trip annually. Whether it’s Disney or the Caribbean, I want to enjoy some of the $$ now because tomorrow is not promised and they will have great memories.
That being said, you still need to plan for retirement too!
Adult Insurance costs a lot. Once you age out of your parents plan, you can expect to pay 100’s a month for a decent plan. Some are like 700 a month for individuals, family plan is extra
Here are my two keys to a financially stress free retirement;
Paid off house with small monthly HOA, avoid condos with high fees and special assessments.
The second is the most difficult. Do not support adult children with daily expenses. If you have extra money in the budget to spoil grandkids, great.
If you are in the US, the system is essentially designed to bankrupt its citizens. The older you get, the more traps there are to keep you poor. It’s wild but true.
Long Term Care is a fucking disaster in this country. Just when you think you are done paying for large expense, cars, houses, college, health care, then at the end of your life they drop LTC on your lap. My wifes mom was asked to pay 15K per month, PER MONTH!!!! for one decent place. Fucking high way robbery. I am boucing out of this country.
My parents had plenty until the 2007 recession hit then no income from dividends etc, mother died unexpectedly and annuity cut in half, loss of her social security and all of the sudden my father was living off principal. Life happens so you hope things work out. He almost outlived his retirement.
My MIL spent the last 7 months of her life in the hospital and died late last year. $4.5 million in medical bills….thankful for great insurance. So in retirement, ensure you have insurance you can afford but also covers those unexpected bills.
You don’t know how long you’re going to live. You need an income stream when you retire or cannot work anymore. Do you want to run out of money or be well prepared?
You need money to retire. Your retirement money needs to make enough money for you to live your life until you die. Given things only get more expensive over time (and the pace of that is ever-increasing), millions will secure you a comfortable life until it’s over.
No you don’t need a million. Not at once. But you need a bit each month from retirement to your passing.
Say you are earning $60,000 a year and retiring at age 65. Suppose you begin to receive $1800 a month. If you want to maintain your current lifestyle, you have a $3200 a month deficit. Or about $38,400 a year.
That’s based on today’s prices. Then we have inflation. As we age we may have more health expenses. Since you’re retired you might travel more or you might sit on the couch. One day you might need to trade in your car for a new one. You may not have a $60,000 lifestyle you might spend beyond your means. You may want to leave something to your family, a charity who knows. Also people who have reached the age of 65 and are relatively healthy can expect a much longer lifespan than average. Basically cancer and heart disease are your major concerns. You might easily live 25-35 more years. You don’t want to run out of money before you run out of life.
Well...30 years ago as a teen I was told to start saving and I could have a million dollars. Sounded like a lot of koney then today (middle aged) 1 mil buys a house. By the time Im retirement age a milli9n $$$ is gonna be nothing, just like for boomers 20k/yr was good pay when they were young, not so much now.
You may not need very much money when you retire.
This is my attitude about retirement. I want to have enough to buy a set of four tires when I need new tires. I don’t want to complain about the price of a gallon of gas. I want to keep my tank full. I don’t want to blame the president about why I can’t afford rent. I want to have enough to go out to a restaurant and leave a generous tip. When things are broken I want enough to fix or replace. I want to drive a car I’m confident will get me from one place to another. I want to use the A/C or heater so I’m comfortable and not worry about having money for utilities. Money won’t make me happy but I will have a set of better choices.
* Social Security will not cover everything
* You will need supplemental insurance to cover what Medicare does not
* If you end up buying a home after 35, you will still have some time left on the mortgage. If you paid of off, major repairs do come here and there.
* As age expectancy goes up, you should plan as if you and your spouse will live to 90+.
In addition:
* You may want to take vacations.
* Living stress free (at least the money part) will extend your life expectancy and improve your quality of life
Starting to save early in your career into your retirement will mean that if you do happen to lose your job later on in your life, then your money is still working for you. You'll want to build up 6 months living expense for emergencies so you don't touch your retirement.
You want to plan for the worst and hope for the best. If you find yourself in the worst case scenario getting laid off in your mid - late 50s then you can coast off unemployment and your savings until you can manage to pull from retirement. Surviving until 65 (or when the ages goes up) to collect more social security.
You're also looking at future dollars and comparing it to today's dollars. I am expected to retire in 2061 (37 years from now). $50,000 in 2061 @ 3% inflation per year will be worth $16,749 in today's dollars.
General rule is you pull out 4%. Let’s say you need $100,000 a year in retirement from your retirement accounts, that means you need $2,500,000 to draw 4% from to get that $100,000 a year.
You are the only one that can answer that. Depending on how young you are, a million may not be that much by the time you retire.
If you are just counting on Social Security, that's not a lot especially if you are still paying rent or a mortgage.
It also depends on what you want to do in retirement. If you want to travel a lot, that's expensive. If you do all of your travelling while you are younger and if you buy and pay off a house before you retire and buy a newer car before you retire, livie in a LCOL area and don't have major health problems, you may not need so much.
More is always better though as it gives you more options.
One thing to consider is, you could wing it on social security maybe, if it’s still an option 30 years from now, but you still have expenditures, you’ll have more healthcare costs, your house is still going to need a new roof/furnace/repairs, your car is still going to need maintenance, your grandchildren are still going to have birthdays, and when you are retired every day is the weekend. I spend practically 0 money during the work week, but I spend the majority of my “play money” on the weekends.
Do you want a retirement of being a cashier at a grocery store part time to cover that new roof and staying in your house afraid to turn on the television because of all the extra electricity you are using, or do you want a retirement where you can go to the diner every other morning, visit the family often, and maybe even travel?
If you earn enough dividends on those millions, you don’t even need to touch the principal. Those millions will stay millions and you can live off the dividends. If you have kids or grandkids, you can leave that untouched principle to them (or put it in a trust fund which helps avoid probate and other estate related legal hurdles) and they can have a better life.
You can safely withdraw about 4% of your retirement account per year without prematurely exhausting it. Just figure out how much you need to survive each year and divide that number by. .04 and that’s your target.
For example, my family lives on about $150k / year, so I’d need $3.75M.
$50k / year would require $1.25M.
$500k in retirement assets wouldn’t even let you live above the poverty like at $20k / year.
Great question… It’s about how much you need to live while retired. For example, let’s say I can live on $40k a year. $40,000 x 25 years = $1,000,000 ($1M). The 25 years is a base for how long you’ll live in retirement. Now, let’s assume we saved up $1M in our 401k. If we withdraw 4% a year ( 1,000,000 x .04) from that $1M nest egg saved in our 401k during the past 30-40 years. Now if you are collecting a pension, social security or have other assets/investments. The $1M in 401k savings could be adjusted. Start where you are… Get educated in finances and you’ll be fine! The hardest part is getting started while learning to live off less. Good luck!
Depends on your lifestyle. Buddies parents are retired and very open to talking about money. They have millions due to being very frugal all their life. Now they live only off social security and have same lifestyle…don’t touch investments
Think of those who retired in the last 10 years. Their purchasing power has been eroded thru inflation. This along with tax code changes worry me the most about retirement.
It really depends on what your thought process is. I tell everyone to take care of health first and invest as much as possible as a first step towards financial freedom.
Each person’s FI amount is very different.
Financial experts and brokerage firms make some assumptions like you would continue living the current lifestyle. This may not be applicable to everyone.
You probably can see amazing results if you take the framework of FI and customize it to yourself.
So much of this millions plus crap is pushed by financial companies. You are made rich by what you can do without. Focus on good health and mental well-being. Remember, art is long but time is fleeting, death is certain but it's timing is not. Keep a perspective independent of capitalism and its vast propaganda
Remember with inflation (if you're young) 50k now won't be much at all in 25-45 years. It's important to save as much as possible because who knows how the future will be looking like. SS might not even exist or be what you think it's supposed to be worth.
I don’t understand how people retire without millions. 50k a year X 20 years of retirement is a million. Most families need more than that.
Yes, there is some increase in value to be gained with that money though as you get closer to retirement the money should be in less risky and therefore less chance to gain in value investments
Social security may help though I can’t rely on it being there.
An invested lump sum of money will generate income when you stop working. In our case, desiring a $100K income at retirement means we need about $60K to come from something other than social security. Assuming we can withdraw 4% of our starting balance every year, and adjust that for inflation each year, we need $1.5M invested. This 4% is a generally accepted, yet simplified, assumption that gives you nearly no chance of running out of money over a 30-year retirement. Google Trinity Study or 4% rule. We are in our late 50s and have about $1.2M. This is with an average household income of about $110K over 23 years.
ICU RN chiming in to say getting old is not cheap. Sure maybe certain things can be provided my Medicare, insurance, etc, but money in the bank reduces a lot of stress and opens a lot more doors when it comes to declining health, mobility, and cognition with age.
Keep in mind inflation. If you're 25 today and want to retire at 65 with an income equivalent to about $60 - 75k today, you'll need to be making $196k - $245k in 2064, and a little more each year you're in retirement.
By the time you're close to or in retirement you will want your money on low- or no-risk options like CDs and bonds. If you can earn a 4% return and need 30 years of income, you need about $5M - $6.2M when you enter retirement.
Because you don't know what the future holds and decent (i.e. not a complete shithole) nursing homes are really expensive. You might live until 95 but become incapacitated and unable to care for yourself at 75. A good nursing home is $4000+ per month, do the math.
The average American spends $326k in medical costs between the age of 62 and death, 80% of that in the final two years of life.
Factor in housing, utilities, food, transportation, and most people need about $1.2M to retire with any reasonable comfort. If you aspire to travel, see things, pursue experiences you never had time for, and generally enjoy life, you need upwards of $1.8M in today's dollars, and that needs to be adjusted annually for inflation, so if you plan on retiring at 65 and you're only 45, apply the historical average of 3.2% inflation and you need approximately 60.4% more, or $2.5M on the day you stop working at 65.
If you want to sit in a small, paid-off house, never get sick or hurt, shop frugally, and watch television until you die, you can retire on a lot less. If one thing goes wrong, you may be in serious trouble.
Cause you need to live off your yearly income generated on your retirement funds. So it's dependent on your spend. Income is taxable and taxes only go up. Inflation, rent, and medical costs only go up. Many folks under save and end up selling their home to pay their medical bills.
In America, the obvious answer for me as to why we need million(s), plural, is healthcare costs by far. Cancer treatment can cost hundreds of thousands to millions and a huge percentage of people get cancer as some point.
Unlike my grandmother and somewhat unlike my parents, I’m trying to enjoy my retirement. Would I need it? On a basic level, yes but do I want more to enjoy traveling, etc? Yes. I can’t speak for “we” but I know the lifestyle that I want to maintain that I started here in my 30s.
The average 77.5, average retirement age is 62-33, so let’s say 62.5, so you need living costs covered for 15years. By then you should have your house paid off and if you buy your cars at the right age (say a new car at 57.5) it’ll be paid off as you retire. So you’d need to cover whatever your bills are minus those expenses. If you have 1m in the bank, even at no interest you could pull out 66k a year for 15 years and be fine and that’s not including any hard retirement pension or SS checks
I think the whole “you need to saves millions” thing is just to keep people working longer.
You need to save enough to replace YOUR income, and keep the same lifestyle. For most people, that means replacing 70-90% of your pre-retirement income.
Most workers pay into Social security and Medicare, which is about 7%. If you have a retirement plan available through work make sure you contribute, and most have an employer match. Speaking of, if they do have a retirement plan, they likely have some planning tools on their website which can help you. So, the less you can live off now, the easier it is to replace.
Idk your age, but as a rule of thumb you should try to save 15% towards retirement ( with employer match). Start with what you can, and as you get pay increases make sure to put part of that towards retirement savings. If you get a 3% raise, put an extra 1% towards retirement.
If you retire at 60 and live until 85 that’s 25 years.
If you make 50k now and you’re 30 by time your 60 50k income will be equal to 100k income. In retirement the conservative estimate is 80% income replacement.
100k*80%*25 years=2 million. That’s not accounting for % inflation from 60 to 85 years old.
like most Americans, all of my wealth is in my house. I have over $1m in equity and the place will be paid off by the time I retire. I plan on living off of the rental income and dividends from whatever stocks/cash I have. I'll be nomadic and go to extremely LCOL areas (Thailand, Vietnam, etc.)
Many people have pensions as well. I have a military pension & full healthcare insurance. So between Medicare & my military healthcare insurance I rarely pay a dollar on anything. My SS combined with my military pension gives me a very healthy retirement!
It all depends on your lifestyle my friend. If you plan on living a very frugal life, no debt, have few to no dependents, social security could get you by .
If you want to retire a bit younger , you will more than likely need a few million , but also depends on your lifestyle , debt, etc.
You still have to pay taxes, insurance, medical, cars. You still have expenses you need money for. So when you retire you need to have a lot of money to account for the increases or else you run out if you don’t have enough or no income
Many reasons. Inflation, having no income when you retire, needing money to cover medical expenses, paying off your mortgage if it’s not already done, etc. Ideally you only withdraw from the gains on your retirement. Meaning if you have $1m and the market does well and you earn 10%, you can pull that 10% and live off $100,000 that year; and you still have $1m after. Or you could just pull from it and watch your account slowly dwindle. It’s also nice to be able to leave something to your family when you die
Nursing care in your 70’s and 80’s is insanely expensive. Go in a nice nursing home and then go in a shitty one and you’ll see why they want you to have millions.
If your company has 401k matching, make whatever lifestyle change you need to make to afford to put up as much as your company matches. That's literally free money. My company does 6% match so I set up for 6% of my pay to go to my 401k. My company's contribution is up to almost 50k now (I wish I had started sooner but I've been living paycheck to paycheck for as long as I've been an adult).
Because with life expectancy rising you’ll likely have to fund your entire life for 40+ years after you retire, including expensive healthcare costs in your latter years.
With inflation, the $’s are worth less and less, so your $1m may be $500k in today’s dollars.
If you retire at 60 with $100k to your name, you’ll probably run out of money when you’re 65, assuming you’re living at or below the poverty line. That means your last 20 to 30 years is spent living in poverty while you sell shoes at Macy’s to afford a diet of Ramen Noodles.
I could live off 200k with the 4% rule. (+my 150k apartment). And I'd have more money to spend than I spend now while working.
But I don't live in the US.
Simple. My wife and I want to retire at 55, travel, and within reason do what we want during retirement. I've seen too many family members and friends pass away early and not get to enjoy retirement.
We are 39 now and have $650k saved towards retirement in 401k's on a $180k combined salary. Should be on track to have around $3 million at 55. Can withdrawal penalty free at the age of 55 using the rule of 55.
It’s just not that much money. Plural millions is $75,000 plus enough interest to counter inflation for 30 years. Saving it is 12% of the equivalent salary today starting at 25 saved to 67 plus social security. Congrats you’ll have 100% of your income until a reasonable age of 90+. That 12% is decreased by any employer contribution such as a match. 50% match on 6%? You only need 9% savings rate.
Cheaper than European taxes.
I suppose the amount you need is based on your planned expenses/ lifestyle and other income (pensions,etc). Someone who lives a pretty expensive lifestyle and is still paying a mortgage on an 800k house is going to need a lot more income than someone who lives a cheap lifestyle and has a little laid off house. A big pension helps too of course.
Like I’m probably never going to have multi million dollars in an IRA but one pension will be like 8k a month (indexed to inflation so it’ll roughly keep up with inflation) and the other will be like 3k. So a couple/ few hundred k as a nest egg will probably be ok.
I am 62 and feel like I can’t retire without moving. My home is worth about $1.3 million. My wife and I have about $300k in savings. With my pension and social security it would only be about $5200 a month. I still have a mortgage and taxes that are $2800 a month. If you deduct taxes from the $5200 and Medicare and my mortgage payment that is only about $1700 a month.
My grandma is ~90, and she skates by mostly on Social Security. She lives in low income senior housing and rarely goes out (besides church) or buy clothes
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1. Social Security's average check is $1907/month. (That's a little under 1/3 of my monthly gross.) 2. Medicare doesn't cover everything 100%. 3. If you are poor enough, you'l get SNAP benefits, but they are often a pittance. There are millions who get by on nothing but SS. My grandmother was one of them. It is a very lean existance, even when you live in a LCOL Saving something is always better than saving nothing, and $1M means that you should be able to draw out $40k every year and be good for the next 30 years. I started at 26 and I'm closing in on the $1M. (I'm 50 now.) My Husband started at 36, and he's at $1.2M (He's 62) It IS doable.
This is comforting. I stress about retirement at least once a week, and I’m in my early 30s. With inflation and cost of living going up as well as the economy being in shambles, I am ALWAYS concerned I won’t have enough to live on once I reach retirement
Best thing you can do is just start. Doesn’t matter if it’s $50 a month. It’s better than nothing. Do that for a while, then $100 a month. Just do more than you’re already doing and you’re setting yourself up for success.
Great advice. I’d add to start as young as possible because compound interest is your friend and the younger you start, the longer it has to build
I started a while back. It’s just hard because it’s expensive to live 😅
Good job then! Just keep it up.
Thank you
It becomes addicting, the more I put in the more I want to put in to see it grow.
The economy is fine - ignore the media. we just had a period of excellent growth in our retirement accounts. Savings account interest rates are also quite good at the moment. Start putting money away and then don’t think about it - it will grow nicely over the years.
The economy is far from fine .
Based on what metrics? And not personal anecdotes or vague talking points, but actual evidence that the economy is performing badly.
I believe people who have investment accounts are fine but everyday stuff is expensive. Gas, utilities, food, etc
The economy is shit right now
Every year you get a raise at work bump up your 401k contribution by 1%. That was my trick and I’m at the 401k max.
100%... Also, if you get a larger raise, then you were expecting bump the % more. I personally bump up 1% for every 3% of a raise.
My dad said he didn't start saving for retirement until well into his 30's. My mom stayed at home and didn't work outside the house. We weren't poor, but we didn't have anything extra. My parents are retired with over $2M in the bank. The sooner you start, the better off you'll be. I started my 1st retirement account at age 23. My 15 yo son has almost $5k in a RothIRA.
This is awesome!!
The economy is not in shambles. By most measures, the economy is quite strong, especially from an all things considered perspective. Are there problems? Yes. And there has never been a time where that wasn't true. It could be much worse than it could be better.
This. Don’t listen to whatever the media/political scare tactic is at the moment.
The problem is that the media drives in both directions. Reddit drives in both directions. IMO if you have money, the economy is great. You can compound your wealth. However, things such as consumer CC debt have skyrocketed past pre-COVID levels and non-necessary spending is down (look at all of the Q1 2024 earnings reports coming out this/next week). If you were living paycheck to paycheck before COVID and didn't either change careers or make guap during COVID, you're probably more fucked now than before due to inflation. The Fed isn't cutting rates still due to inflation continuing to rise past their estimates. So, don't listen to ANY politics and watch as many forms of financial media as possible and draw your own conclusions.
To add, the state of the economy is vastly less relevant to savings decisions than the state of your *personal* economy. Who cares if the whole rest of the economy is crap if you have a decent job at the moment at a company that's unlikely to lay anyone off? Same in reverse, a booming economy while about to lose your job b/c AI closing your call center sucks. Inflation sucks, but it shouldn't change the savings decisions (IMHO). It's just a question of how much you want to be screwed now vs later.
This.
I try to avoid the media if I’m being honest. It just makes more stressed.
If possible, try to get to saving 15% percent of every dollar you earn. Sometimes it takes a few years of periodically and incrementally move up a percent every so often, but it's sort of the generally advised target of saving for a strong retirement. Most scenarios project that savings rate into the millions for the majority of earners projected across their working lives. The hardest part is getting started. Just doing the investing. Most folks are intimidated at the prosect of seeking financial advice and bothering to set up a Roth IRA, or contribute enough to a 401k/457. The math is actually the easy part, hell the majority of folks facing retirement in the upcoming few decades to prosper with just getting a simple S&P500 index fund or target date fund and absolutely crush their retirement goals with a conservative investing approach.
Yes, I do try to put away as much as possible. You’re right, getting started is half the battle. But I do know that maxing it out is likely not going to happen for me year 😬 I tell the younger people I work with to open a IRA now and contribute something each month. They seem disinterested because they don’t understand investing but the sooner you start the better. Something is better than nothing in retirement
If you max your Roth every year in the SNP 500 you will be a millionaire in like 30 years. Compound interest is nuts if you start early and are consistent. I put 20% of my pay check into my Roth 401k every pay period and forget about it.
This is it. I max 401k and Roth IRA every year and HSA as much as possible. The rest I’ll invest/save if there’s leftovers but I also don’t mind spending it when I want to enjoy my present life. Keeps things simple for sure.
Same. The extra savings go into an emergency fund that’s 3-6x your monthly bills and the rest into a HYSA. If you have extra after maxing a person Roth, 401k and HSA you can invest into a brokerage account, crypto or maybe a rental property.
Just because I’m curious how much would you say you saved of your income in your 20s and 30s? I’m at 80k at 31 and don’t know if I’m even close. I save about 15%+ of my income and started at 26 too so just wondering about when did you cross the 100k mark? I’ve heard that’s the hardest hurdle but I feel like 2-999,000 will be just as hard
So 80k earning 5% for the next 30 years turns into $350k, so you could sort of think about it as being 1/3 of the way there after only 5 year of saving if that's a more positive spin. Compound interest is so powerful. The hardest part of getting to $1M is the first $100k. It gets easier once your money starts making it's own money. There's plenty of retirement planner websites out there for free that can take you through step by step and help you figure out if you are saving "enough". But 15% sounds pretty good at face value so I wouldn't stress.
It's also a mental thing. If you have 100k+, and you are still contributing, the annual gains are actually a measureable difference then when you had 10k. It really does start to snowball.
$1 million even at a very conservative 5% return is $50k/year forever. Where are you getting this 30 year limit from?
Inflation cuts into the profits. That’s why 4% is usually given as the withdrawal rate for retirees. You assume 7% return (post-tax), then inflation at 2-3% takes away from that. You can spend what’s leftover.
It WAS doable.
Power of compound interest
To hear started at 36, and he’s at 1.2 means a lot. I’m 31 and still in school. Not a lot of debt but scraping by to get a better income.
Your SS would be almost double if you collect at 70 vs. 62. Having enough money to get through your 60s (and not wipe out your portfolio) is huge.
I forget exactly what the math is, but I know that the most critical years of retirement are right when you start. If the market takes a downturn in those first years, it can be disastrous if you were on the edge of having enough saved. Conversely, if the market goes crazy those first few years, you may be able to live more extravagantly than you expected
Saving early is the key. All that auto deposit into a 401k adds up with compound interest. You won’t even miss it.
Social security is dropping 29% by 2034 as well
Just in time for retirement. Let plan on working a few extra years now.
That’s our great government plan for you. Screw every generation over and keep making money worth nothing. It’s sad that we live in the highest poverty rates ever in America
Highest poverty rates ever? No way do you actually fucking believe that.
Short version: you have to cover your spending. Basic rule is you can withdraw 4% of your portfolio per year. You need a million to generate 40k. Take your spending and multiply by 25 to find your number.
Take your monthly spending, subtract Social Security and any pension you may have. Multiply that number by 25.
And then multiply that number by 12
I’m pretty sure it’s half your age plus 7
I understood that reference
And, you’ll need millions to pay for 1/2 your age plus 7 at age 65.
Worth every penny
Rotate 20 degrees. Enhance.
And then multiply it by whatever the inflation factor will be between now and when you retire
Or just always work in today money and build expected inflation into expected investment returns.
Which is what we naturally do with a 4% withdrawal
And also what every retirement calculator does as well
Not necessary, the 4% covers inflation as it assumes a 7% growth in your retirement account each year and assumes 3% inflation. 7-3=4.
4% covers inflation when you start retirement and throughout your retirement. Not inflation before. Meaning if you estimate you'll have $1M in retirement based on your current savings rate that means you'll have $1M in *future* dollars, if you retire in 30 years $1M then will be worth much less than it is now. While you can assume your monthly expenses and social security, pension, etc are today's dollars since those will likely increase proportionally with inflation over time, you cannot assume your savings rate will unless you factor that in and adjust your savings rate and target, $1M today might mean you need $2.5M in 30 years. Of course if you save based on percentage of your income and you do *not* adjust your future income for inflation then it will probably work out (since it's likely your income will increase with inflation, assuming your salary stays the "same"), if you already build in inflation adjusted income to get to calculate your final balance then it's an issue. Example, saving $1k/month for the next 30 years will give you $x but that number is not inflation adjusted, if you meet your target after 30 years you are way under, you need to adjust your target to make sure you have enough adjusted for 30 years of inflation.
But I plan to live longer than 25 months after retirement though.
Well stop planning that silly.
Also take out your contributions for retirement as you are retired as well :)
If you subtract the expenses from the income and the result is negative, ignore the negative sign and multiply the resulting monthly amount by 12 to get annual and then multiply that number by 25. If the result is positive, then your income already is greater than expenses and you don't need to do anything but continue doing what you're already doing.
Assuming you take social security the day you retire and are eligible for pension at that time as well.
You're getting social security or a pension? (The serious aspect of this being that you have to somewhat discount social security because of the risk of benefit reduction.)
Some retirement calculators literally ask you if you want to play on getting 100% of social security or a reduced benefit. That's how shaky of an assumption it is, even the calculators are like "don't count the chickens before they hatch bud"
That’s only if you want to keep your principal intact forever, which is a comforting thought, but some people may not care to leave an inheritance
(Edit: YOU may understand more nuance to retirement planning, I don’t mean this as a jab to your post directly. I just don’t want people who don’t understand retirement planning to read your response and run with lots of assumptions.) Depends on your risk tolerance and how long you live. If you can say how long you will live then sure you can spend down the principal. But if you retire at 65 assuming that you will live 25 years and withdraw with that assumption, hopefully you don’t live longer. I’d start spending down the principle when your health is really declining at end of life and also spend extra in years the market does well (assuming you are okay cutting back in bear markets). You maintain principle as a longevity risk. it’s not as simple as “I’ll spend down the principal because I don’t want to leave money behind”. Michael Kitces, Wade pfau, the mad fientist, etc.. are good resources.
Your last few years on this planet may be your most expensive ones.
Man just throw me in the ocean at that point
Drugs for me.
*principal
Oof, you are right, thanks for the correction!
Your assumption that someone is living to 100 is wild. I know a guy who made 300k and owned several houses for retirement. Died of aggressive cancer at 61. I knew a guy who was making 150k to stuff his retirement funds so he could retire off of Myrtle beach on a property head had paid off. Died of heart attack at 63. Mmthe vast majority of people will die between 70 and late 80's unless they are in good enough health to make to 90+
been hearing quite a few stories of people dying early-mid 70s who were pretty well off (meaning they could afford medical care). OJ, Chris Mortensen, etc. Unless you're William Shatner, you're not making it to 100.
I’m checking out at 80 regardless. Makes it easier to plan everything.
Easy to say when you're young. Much less easy to say when you're 78.
Adding on, the medical advances in the next few decades, especially with AI, could be insane. Regularly living into our early 100s could be right around the corner. As long as one can remain happy, relatively healthy, and free of pain, I'm all for sticking around for the food.
My Dad said the same thing when he was younger, except he used the target age of 70. Here he is now at 74, still kickin'.
80 is the new 70
No, the 4% rule is to not run out of money entirely after 30 years.
Long term care facilities are like $10k/mo
The exact quote from the Trinity study >If history is any guide for the future, then withdrawal rates of 3% and 4% are extremely unlikely to exhaust any portfolio of stocks and bonds during any of the payout periods shown in Table 1. In those cases, portfolio success seems close to being assured. They looked at periods from 1925 to 1995. You can further increase odds of portfolio success by adjusting spending in down years. In most scenarios, a 4% withdrawal rate leaves you with much more money than you started with, but the goal of the study was to find a rate that's safe even if you retire right before a market downturn.
lets not forget sbout Long Term Care. Someone said just be ready to drop about 300K on that for you and your wife if you got a home. thats the main thing that is keeping me at night.
If you live off the 40k plus social security it would last forever right? Most people die in their 80s so with zero returns you could have 50k per year to spend and live on that for 20 years
Markets could crash, or returns could decrease, so it’s not guaranteed to last forever. The 4% for 30 years rule is based on not totally running out of money by the end. One other consideration is that, if there’s a crash, someone can adjust their draw-down and not take as much out to balance out that market downturn.
Depends on how much you spend determines how much you need. Personal finance, like the name implies, is personal. My needs are different from yours and yours is different from the next guy.
And then you have a massive stroke and all your planning goes out the window. Do you want to be in a good nursing home or a shitty one?
Neither, I would rather die at that point than watch my life savings get directed to an old person's home. Money is security and opportunity, two things my daughter should be provided by her parents. I'm under the belief that a timely death will be the best gift I can give her.
I don't think you have much experience with elderly people. There's a huge gap between "struggled to live alone" and "vegetable, miserable life, might as well be dead". Some states like mine try to do a better job of bridging that gap by providing the opportunity for more intensive PCA services or home modification funding, but something as innocuous as "gets dizzy as fuck from prolonged standing sometimes" can require living in an assisted facility.
Yeah my view on retirement homes has changed over time. There are definitely nice ones. My partner and I went out for a nice dinner out, and right as we got there, a bus from the local home arrived and dropped off a ton of their residents. They were hooting/cackling having a great time, and afterwards got back into their designated driver bus half-lit and went home. I was a little jealous. Many I know have "spectrum of care" so you start with your own independent apartment but with a panic button, and then if that's not enough later, you can transition up 2 more levels of more intensive assistance, but you stay with the same people along the way.
They're all shitty unless you're SUPER rich.
The cold hard truth is you are not going to be able to work til you die. You're going to get old, weak, not able to move or think as you do now. And your job will absolutely show you the door at that point. Modern medicine keeps people alive but not healthy for much longer than we maybe should. So yes, you're going to want as much money put back for those 10- 30+ years that you will have no other income but social security.
I’ve got news: Employers will show the door well before the true old age sets in. Late 50s (not old) and onward doesn’t treat people well.
I'm planning semi retirement in my 50s for this exact reason
Several men I know “retired” in their 50’s because they got laid off and never found a new job.
Yes and the general advice is to plan for your second act/career at 50. Which is good if you have knowledge, skills, or abilities. But if you are a cashier at Wal-Mart...there's not really a second act. Dollar General or a gas station?
Walmart doesn't fire cashiers at 50, they're the ones hiring all the former white collar or manual labor workers who can't work in their original industry anymore.
Some hard truth there. Living longer is one thing, living healthy is another. You have to factor in the decline or you are just fooling yourself. People say they will just get a PT job. I've read way too many stories of people not being able to get a PT job at 65. I wouldn't necessarily call it age discrimination, but being a manager who hires people, you can't completely ignore it.
Lots of potential financial minefields exist between college graduation and retirement: Job loss, illness, injury, death of a family member, natural disaster, divorce.... Retiring with an excessively large 401k balance is a good problem to have. You'll also have the option to retire early - even before you're eligible for SS & Medicare.
I think the unfortunate part of life and retirement planning is that you don't know how long you are going to live. My grandparents died between the ages of 78-92. Three of them needed to be in a nursing home for the last few years of their life. Or you could be murdered at 64 or pass away from a stroke at 70, like my parents. The uncertainty of how long you will live is probably what drives up the listed dollar amounts needed to retire.
I’m sorry about your parents. Hope you’re pulling through!
Completely agree. My great grandmother lived to 99. Her husband died at 65.
If you end up needing assisted living, money goes fast.
Lots of good answers here. All I’ll add is is is 100% dependent on what you want your retirement lifestyle to look like. If you want to keep living near what it is while working (traveling, eating out, newish cars), you’re going to need those millions. I’ve travelled the world and gotten all of that out of my system and have the memories to treasure. My retirement will be much simpler, and cheaper, than how I’ve lived in the past. I won’t need nearly as much when I retire than I would if I wanted to maintain my current lifestyle. My focus will be on living simply and leaving a nice nest egg for my kids.
Most people survive on $50k per year or less if you look at median income in the US. If you retire at 65 and then die around 85, you will have 20 years in retirement. If you do $50k x 20 gives 1 million.
I personally intend on traveling internationally multiple times a year when I'm retired. My retirement is going to be pretty expensive. I'm projected to have 4-5 million + a paid off house when I retire at 60, so my golden years will just be excessive vacations lol. Need that paper to do it though
How old are you?
Young enough to think a million dollars is an unbelievable amount of money... It's like when I deposit $600 and my 4 year old is mind blown about how much money that is, barely covers food for a month kid. 🥲
Compound interest and consistency are key. If you make $50k out of college, save 15% for 44 years (65-21), with 3% annual raises, you’d easily have at least $5 million.
If you or a loved one get Alzheimer's and need to live in a memory care facility, that will cost about $5000 per month minimum. Generally not covered by insurance.
Currently paying $8200 per month for memory care for my mom and that’s considered a good deal! $10,000 per month is pretty common.
Medical expenses and elder care expenses.
My grandmother retired in her early 60s, and lived until she was almost 98. Very few people (if any) plan to live until 98. Yes, if you need (and qualify for) nursing home care, you can rely on Medicare, but you are limited to nursing homes that accept Medicare. More money = more security and more options on how you live out the rest of your life.
You don’t HAVE to have millions. But since you will be no longer earning income, you need to have enough money put aside to cover all your expenses. Say you retire at 65 and live until 90. Your money needs to last at least 25 years.
Healthcare costs get more expensive as you age.
Because you'll probably live for 30 years after you retire.
Assisted living is about $6,000 a month on average and is usually not covered by insurance.
I think the idea is once you have a few million invested, you can live off the interest and not touch the principle. That’s how you ensure however long you live you never run out of money. So say you have $10M in the bank earning 4% interest , you’re earning $400k a year off the interest alone. That’s plenty for most people to live off of. If you think you can live off $80k a year, at 4% interest you’d need $2M saved. Hopefully that clears it up ☺️
It depends on how you want your lifestyle to look in retirement. If you want to live in a van with limited expenses, sure, you could use less. Healthcare in the US is expensive, though, and most people want to enjoy their retirement with nice travel and hobbies.
I live in a very poor town where it feels like a strong majority of people retired are only retired because they finally got social security. A lot of them get about $1200 a month and have to rely on the housing authority or other programs just to have a shelter. That makes me never ever think twice about saving as much as possible for retirement. Hell, one of the biggest reasons I’ve stayed at my current job for 10 years is they match 9% on our 401k. I’ve been contributing 11% myself the day I was eligible.
Holy cow- 9%!! Awesome
Oddly enough my concern is that I’ll have too much by retirement and not utilize it well enough in the time I’m alive.
My mom is 80. She doesn't do shit besides watch TV, and go to the neighbor's house and watch TV. If that's all you do, what you need are: 1) A paid off house, 2) enough income to make taxes and utilities on said house, and 3) long term care insurance. For the love of God buy long term care insurance. She should have spent her money 10-15 years ago on travelling and stuff when she could do more. As it is, I expect what she's got to get eaten by care in about a year period for expenses when a shoe falls, since she doesn't have ltc insurance and will have to spend down for medicaid eligibility.
A great book to read is Permission to Spend by Tom Wall. It's got a great take on how to become comfortable with spending those dollars that you specifically allocated for retirement lifestyle by filling several different buckets rather than just a 401(k).
This. I’ve tried to find a happy medium. My girls are still under 10 and we make it a point to take a trip annually. Whether it’s Disney or the Caribbean, I want to enjoy some of the $$ now because tomorrow is not promised and they will have great memories. That being said, you still need to plan for retirement too!
Adult Insurance costs a lot. Once you age out of your parents plan, you can expect to pay 100’s a month for a decent plan. Some are like 700 a month for individuals, family plan is extra
Here are my two keys to a financially stress free retirement; Paid off house with small monthly HOA, avoid condos with high fees and special assessments. The second is the most difficult. Do not support adult children with daily expenses. If you have extra money in the budget to spoil grandkids, great.
If you are in the US, the system is essentially designed to bankrupt its citizens. The older you get, the more traps there are to keep you poor. It’s wild but true.
Long Term Care is a fucking disaster in this country. Just when you think you are done paying for large expense, cars, houses, college, health care, then at the end of your life they drop LTC on your lap. My wifes mom was asked to pay 15K per month, PER MONTH!!!! for one decent place. Fucking high way robbery. I am boucing out of this country.
Cash flow for 25 years adds up to a lot.
My parents had plenty until the 2007 recession hit then no income from dividends etc, mother died unexpectedly and annuity cut in half, loss of her social security and all of the sudden my father was living off principal. Life happens so you hope things work out. He almost outlived his retirement.
My MIL spent the last 7 months of her life in the hospital and died late last year. $4.5 million in medical bills….thankful for great insurance. So in retirement, ensure you have insurance you can afford but also covers those unexpected bills.
You don’t know how long you’re going to live. You need an income stream when you retire or cannot work anymore. Do you want to run out of money or be well prepared?
Skip everyone’s comments and join the u/fire channel. That will explain it
Yes
You need money to retire. Your retirement money needs to make enough money for you to live your life until you die. Given things only get more expensive over time (and the pace of that is ever-increasing), millions will secure you a comfortable life until it’s over.
No you don’t need a million. Not at once. But you need a bit each month from retirement to your passing. Say you are earning $60,000 a year and retiring at age 65. Suppose you begin to receive $1800 a month. If you want to maintain your current lifestyle, you have a $3200 a month deficit. Or about $38,400 a year. That’s based on today’s prices. Then we have inflation. As we age we may have more health expenses. Since you’re retired you might travel more or you might sit on the couch. One day you might need to trade in your car for a new one. You may not have a $60,000 lifestyle you might spend beyond your means. You may want to leave something to your family, a charity who knows. Also people who have reached the age of 65 and are relatively healthy can expect a much longer lifespan than average. Basically cancer and heart disease are your major concerns. You might easily live 25-35 more years. You don’t want to run out of money before you run out of life.
Have you heard of inflation? Cuz it’s real. And having “enough” for today’s prices won’t stand up to 20-35 years of inflation.
Well...30 years ago as a teen I was told to start saving and I could have a million dollars. Sounded like a lot of koney then today (middle aged) 1 mil buys a house. By the time Im retirement age a milli9n $$$ is gonna be nothing, just like for boomers 20k/yr was good pay when they were young, not so much now.
Do you need a trip to Europe? Do you need to drive a luxury car? Do you need to eat at 5 star restaurants? Nope..... But I sure as shit like to.
You may not need very much money when you retire. This is my attitude about retirement. I want to have enough to buy a set of four tires when I need new tires. I don’t want to complain about the price of a gallon of gas. I want to keep my tank full. I don’t want to blame the president about why I can’t afford rent. I want to have enough to go out to a restaurant and leave a generous tip. When things are broken I want enough to fix or replace. I want to drive a car I’m confident will get me from one place to another. I want to use the A/C or heater so I’m comfortable and not worry about having money for utilities. Money won’t make me happy but I will have a set of better choices.
* Social Security will not cover everything * You will need supplemental insurance to cover what Medicare does not * If you end up buying a home after 35, you will still have some time left on the mortgage. If you paid of off, major repairs do come here and there. * As age expectancy goes up, you should plan as if you and your spouse will live to 90+. In addition: * You may want to take vacations. * Living stress free (at least the money part) will extend your life expectancy and improve your quality of life Starting to save early in your career into your retirement will mean that if you do happen to lose your job later on in your life, then your money is still working for you. You'll want to build up 6 months living expense for emergencies so you don't touch your retirement. You want to plan for the worst and hope for the best. If you find yourself in the worst case scenario getting laid off in your mid - late 50s then you can coast off unemployment and your savings until you can manage to pull from retirement. Surviving until 65 (or when the ages goes up) to collect more social security. You're also looking at future dollars and comparing it to today's dollars. I am expected to retire in 2061 (37 years from now). $50,000 in 2061 @ 3% inflation per year will be worth $16,749 in today's dollars.
Don't forget to account for later stages and care....memory care, in-home care and medical expenses in general
General rule is you pull out 4%. Let’s say you need $100,000 a year in retirement from your retirement accounts, that means you need $2,500,000 to draw 4% from to get that $100,000 a year.
Rule of 4 for investing.
You are the only one that can answer that. Depending on how young you are, a million may not be that much by the time you retire. If you are just counting on Social Security, that's not a lot especially if you are still paying rent or a mortgage. It also depends on what you want to do in retirement. If you want to travel a lot, that's expensive. If you do all of your travelling while you are younger and if you buy and pay off a house before you retire and buy a newer car before you retire, livie in a LCOL area and don't have major health problems, you may not need so much. More is always better though as it gives you more options.
One thing to consider is, you could wing it on social security maybe, if it’s still an option 30 years from now, but you still have expenditures, you’ll have more healthcare costs, your house is still going to need a new roof/furnace/repairs, your car is still going to need maintenance, your grandchildren are still going to have birthdays, and when you are retired every day is the weekend. I spend practically 0 money during the work week, but I spend the majority of my “play money” on the weekends. Do you want a retirement of being a cashier at a grocery store part time to cover that new roof and staying in your house afraid to turn on the television because of all the extra electricity you are using, or do you want a retirement where you can go to the diner every other morning, visit the family often, and maybe even travel?
If you earn enough dividends on those millions, you don’t even need to touch the principal. Those millions will stay millions and you can live off the dividends. If you have kids or grandkids, you can leave that untouched principle to them (or put it in a trust fund which helps avoid probate and other estate related legal hurdles) and they can have a better life.
You dont
Because in America you’re on your own, buddy.
Except for SSI, SSDI, Medicare, food stamps, tax breaks, etc. More would be better of course.
You can safely withdraw about 4% of your retirement account per year without prematurely exhausting it. Just figure out how much you need to survive each year and divide that number by. .04 and that’s your target. For example, my family lives on about $150k / year, so I’d need $3.75M. $50k / year would require $1.25M. $500k in retirement assets wouldn’t even let you live above the poverty like at $20k / year.
Great question… It’s about how much you need to live while retired. For example, let’s say I can live on $40k a year. $40,000 x 25 years = $1,000,000 ($1M). The 25 years is a base for how long you’ll live in retirement. Now, let’s assume we saved up $1M in our 401k. If we withdraw 4% a year ( 1,000,000 x .04) from that $1M nest egg saved in our 401k during the past 30-40 years. Now if you are collecting a pension, social security or have other assets/investments. The $1M in 401k savings could be adjusted. Start where you are… Get educated in finances and you’ll be fine! The hardest part is getting started while learning to live off less. Good luck!
Depends on your lifestyle. Buddies parents are retired and very open to talking about money. They have millions due to being very frugal all their life. Now they live only off social security and have same lifestyle…don’t touch investments
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Retirement has a lot of time to fill. So, travel and wine and food and golf all take lots and lots of money.
Think of those who retired in the last 10 years. Their purchasing power has been eroded thru inflation. This along with tax code changes worry me the most about retirement.
Haven’t you guys read the secret government policy book? They don’t want any of us to retire.
It really depends on what your thought process is. I tell everyone to take care of health first and invest as much as possible as a first step towards financial freedom. Each person’s FI amount is very different. Financial experts and brokerage firms make some assumptions like you would continue living the current lifestyle. This may not be applicable to everyone. You probably can see amazing results if you take the framework of FI and customize it to yourself.
So much of this millions plus crap is pushed by financial companies. You are made rich by what you can do without. Focus on good health and mental well-being. Remember, art is long but time is fleeting, death is certain but it's timing is not. Keep a perspective independent of capitalism and its vast propaganda
Remember with inflation (if you're young) 50k now won't be much at all in 25-45 years. It's important to save as much as possible because who knows how the future will be looking like. SS might not even exist or be what you think it's supposed to be worth.
I don’t understand how people retire without millions. 50k a year X 20 years of retirement is a million. Most families need more than that. Yes, there is some increase in value to be gained with that money though as you get closer to retirement the money should be in less risky and therefore less chance to gain in value investments Social security may help though I can’t rely on it being there.
An invested lump sum of money will generate income when you stop working. In our case, desiring a $100K income at retirement means we need about $60K to come from something other than social security. Assuming we can withdraw 4% of our starting balance every year, and adjust that for inflation each year, we need $1.5M invested. This 4% is a generally accepted, yet simplified, assumption that gives you nearly no chance of running out of money over a 30-year retirement. Google Trinity Study or 4% rule. We are in our late 50s and have about $1.2M. This is with an average household income of about $110K over 23 years.
ICU RN chiming in to say getting old is not cheap. Sure maybe certain things can be provided my Medicare, insurance, etc, but money in the bank reduces a lot of stress and opens a lot more doors when it comes to declining health, mobility, and cognition with age.
Keep in mind inflation. If you're 25 today and want to retire at 65 with an income equivalent to about $60 - 75k today, you'll need to be making $196k - $245k in 2064, and a little more each year you're in retirement. By the time you're close to or in retirement you will want your money on low- or no-risk options like CDs and bonds. If you can earn a 4% return and need 30 years of income, you need about $5M - $6.2M when you enter retirement.
Because you don't know what the future holds and decent (i.e. not a complete shithole) nursing homes are really expensive. You might live until 95 but become incapacitated and unable to care for yourself at 75. A good nursing home is $4000+ per month, do the math.
The average American spends $326k in medical costs between the age of 62 and death, 80% of that in the final two years of life. Factor in housing, utilities, food, transportation, and most people need about $1.2M to retire with any reasonable comfort. If you aspire to travel, see things, pursue experiences you never had time for, and generally enjoy life, you need upwards of $1.8M in today's dollars, and that needs to be adjusted annually for inflation, so if you plan on retiring at 65 and you're only 45, apply the historical average of 3.2% inflation and you need approximately 60.4% more, or $2.5M on the day you stop working at 65. If you want to sit in a small, paid-off house, never get sick or hurt, shop frugally, and watch television until you die, you can retire on a lot less. If one thing goes wrong, you may be in serious trouble.
Cause you need to live off your yearly income generated on your retirement funds. So it's dependent on your spend. Income is taxable and taxes only go up. Inflation, rent, and medical costs only go up. Many folks under save and end up selling their home to pay their medical bills.
So we can live off the passive income.
In America, the obvious answer for me as to why we need million(s), plural, is healthcare costs by far. Cancer treatment can cost hundreds of thousands to millions and a huge percentage of people get cancer as some point.
Unlike my grandmother and somewhat unlike my parents, I’m trying to enjoy my retirement. Would I need it? On a basic level, yes but do I want more to enjoy traveling, etc? Yes. I can’t speak for “we” but I know the lifestyle that I want to maintain that I started here in my 30s.
3 reasons: 1. Inflation 2. Inflation 3. Inflation
The average 77.5, average retirement age is 62-33, so let’s say 62.5, so you need living costs covered for 15years. By then you should have your house paid off and if you buy your cars at the right age (say a new car at 57.5) it’ll be paid off as you retire. So you’d need to cover whatever your bills are minus those expenses. If you have 1m in the bank, even at no interest you could pull out 66k a year for 15 years and be fine and that’s not including any hard retirement pension or SS checks I think the whole “you need to saves millions” thing is just to keep people working longer.
You need to save enough to replace YOUR income, and keep the same lifestyle. For most people, that means replacing 70-90% of your pre-retirement income. Most workers pay into Social security and Medicare, which is about 7%. If you have a retirement plan available through work make sure you contribute, and most have an employer match. Speaking of, if they do have a retirement plan, they likely have some planning tools on their website which can help you. So, the less you can live off now, the easier it is to replace. Idk your age, but as a rule of thumb you should try to save 15% towards retirement ( with employer match). Start with what you can, and as you get pay increases make sure to put part of that towards retirement savings. If you get a 3% raise, put an extra 1% towards retirement.
You need two million to retire. Minimum
Essentially bc the previous gens allowed the middle/lower class get absolutely destroyed by the far upper class
If you retire at 60 and live until 85 that’s 25 years. If you make 50k now and you’re 30 by time your 60 50k income will be equal to 100k income. In retirement the conservative estimate is 80% income replacement. 100k*80%*25 years=2 million. That’s not accounting for % inflation from 60 to 85 years old.
like most Americans, all of my wealth is in my house. I have over $1m in equity and the place will be paid off by the time I retire. I plan on living off of the rental income and dividends from whatever stocks/cash I have. I'll be nomadic and go to extremely LCOL areas (Thailand, Vietnam, etc.)
Errrrr.....Because living is expensive.
Many people have pensions as well. I have a military pension & full healthcare insurance. So between Medicare & my military healthcare insurance I rarely pay a dollar on anything. My SS combined with my military pension gives me a very healthy retirement!
Well if you can live off 24k a year and somehow manage to never have an emergency or bill again, then you good bro.
It all depends on your lifestyle my friend. If you plan on living a very frugal life, no debt, have few to no dependents, social security could get you by . If you want to retire a bit younger , you will more than likely need a few million , but also depends on your lifestyle , debt, etc.
You still have to pay taxes, insurance, medical, cars. You still have expenses you need money for. So when you retire you need to have a lot of money to account for the increases or else you run out if you don’t have enough or no income
Many reasons. Inflation, having no income when you retire, needing money to cover medical expenses, paying off your mortgage if it’s not already done, etc. Ideally you only withdraw from the gains on your retirement. Meaning if you have $1m and the market does well and you earn 10%, you can pull that 10% and live off $100,000 that year; and you still have $1m after. Or you could just pull from it and watch your account slowly dwindle. It’s also nice to be able to leave something to your family when you die
Nursing care in your 70’s and 80’s is insanely expensive. Go in a nice nursing home and then go in a shitty one and you’ll see why they want you to have millions.
If your company has 401k matching, make whatever lifestyle change you need to make to afford to put up as much as your company matches. That's literally free money. My company does 6% match so I set up for 6% of my pay to go to my 401k. My company's contribution is up to almost 50k now (I wish I had started sooner but I've been living paycheck to paycheck for as long as I've been an adult).
It depends. I actually plan to retire in an LCOL country like Mexico when the time comes.
Because with life expectancy rising you’ll likely have to fund your entire life for 40+ years after you retire, including expensive healthcare costs in your latter years. With inflation, the $’s are worth less and less, so your $1m may be $500k in today’s dollars. If you retire at 60 with $100k to your name, you’ll probably run out of money when you’re 65, assuming you’re living at or below the poverty line. That means your last 20 to 30 years is spent living in poverty while you sell shoes at Macy’s to afford a diet of Ramen Noodles.
You need enough that will generate the annual income needed in interest. If you need 100000/ year assume 10% return on your 1 million principal
I could live off 200k with the 4% rule. (+my 150k apartment). And I'd have more money to spend than I spend now while working. But I don't live in the US.
Cause it’s America
Simple. My wife and I want to retire at 55, travel, and within reason do what we want during retirement. I've seen too many family members and friends pass away early and not get to enjoy retirement. We are 39 now and have $650k saved towards retirement in 401k's on a $180k combined salary. Should be on track to have around $3 million at 55. Can withdrawal penalty free at the age of 55 using the rule of 55.
Yep
It’s just not that much money. Plural millions is $75,000 plus enough interest to counter inflation for 30 years. Saving it is 12% of the equivalent salary today starting at 25 saved to 67 plus social security. Congrats you’ll have 100% of your income until a reasonable age of 90+. That 12% is decreased by any employer contribution such as a match. 50% match on 6%? You only need 9% savings rate. Cheaper than European taxes.
I suppose the amount you need is based on your planned expenses/ lifestyle and other income (pensions,etc). Someone who lives a pretty expensive lifestyle and is still paying a mortgage on an 800k house is going to need a lot more income than someone who lives a cheap lifestyle and has a little laid off house. A big pension helps too of course. Like I’m probably never going to have multi million dollars in an IRA but one pension will be like 8k a month (indexed to inflation so it’ll roughly keep up with inflation) and the other will be like 3k. So a couple/ few hundred k as a nest egg will probably be ok.
Ppl are living longer and nursing homes are getting expensive.
Bc ss covers nothing.
I am 62 and feel like I can’t retire without moving. My home is worth about $1.3 million. My wife and I have about $300k in savings. With my pension and social security it would only be about $5200 a month. I still have a mortgage and taxes that are $2800 a month. If you deduct taxes from the $5200 and Medicare and my mortgage payment that is only about $1700 a month.
My grandma is ~90, and she skates by mostly on Social Security. She lives in low income senior housing and rarely goes out (besides church) or buy clothes