As we set out to write this blog post about retirement, we began thinking – of all things – about the movie Austin Powers.
Specifically the scene where Dr. Evil, the film’s villain – who had been cryogenically frozen for 30 years — unveils his plan to hold the world ransom for…”one MILLION dollars,” unaware that $1 million is no longer an impressive sum of money.
We have to say, we see the movie’s point. On one hand, $1 million can be a life-changing amount of money. On the other hand, it may not be enough to fund your retirement.
So, how much DO I need to retire?
For years, $1 million was the target experts suggested most people try to hit when building a retirement nest egg.
We’ve also seen other sources – places like Forbes, Vanguard and The Motley Fool – suggest ensuring your post-retirement income is anywhere from 60 to 80 percent of your pre-tax income during your working years. The AARP says you should aim for $1 million to $1.5 million, or 10 to 12 times your income.
“For people approaching retirement, those figures might be a source of panic, denial and dread,” the AARP says on its website.
“But a true retirement number is different for everyone, says Dan Yu, managing principal at EisnerAmper Wealth Advisors. It depends on factors such as where you’ll live and how healthy you’ll be as you age. And most challenging of all — how long will you live?”
Here are four things they suggest asking to calculate the big question: How much do I need to retire?
1. What will my cost of living look like?
Create a budget to track your expenses. Some financial planners say you’ll need 70 to 80 percent of pre-retirement income when you’ve finish working, while others say that figure is too conservative and go all the way to 100 percent.
That’s because our spending doesn’t really slow down in the first years of our retirement, according to Yu. For example, a lot of new retirees find themselves traveling – and thus spending – more.
2. What if you outlive your retirement funds?
People are living longer, healthier lives, but many of us still plan for a retirement that will only last 15-20 years. Statistically speaking, an upper middle class couple who are in their mid-60s today have a better than average chance of both living to 95.
3. Are my savings enough?
In order for you to generate $40,000 a year for 30 years once you stop working, you’ll need to have amassed a retirement savings of $1.18 million. The AARP says this figure was calculated using average returns of six percent and inflation of 2.5 percent.
4. What if I don’t have enough?
If any of the numbers we’ve mentioned seem out of reach, don’t panic. Just start saving. Again, from the AARP website:
“Savers can double, on average, their nest eggs in the last decade or so of their working lives, thanks to the magic of compound interest, says Michael Kitces, director of planning research at Pinnacle Advisory Group. Think about going from two cars to one or cut back on travel to keep spending low.”
At Pennsylvania Stairlifts, we try to do our best to help seniors get the most out of their post-retirement life, whether it’s by offering information on retirement planning, or providing affordable, high-quality stair lifts and platform lifts that allow them to enjoy their homes for longer.
Contact us today to learn how we can make life after retirement easier for you and your loved ones.