Retirement is a topic that never seems to go out of style, especially in the world of finance. In fact, financial planners themselves have been known to engage in bidding wars over the “magic number” required to retire in comfort. But, who are these planners and what do they expect from their own golden years?
A recent Northwestern Mutual survey found that the average American needs $1.27 million for a comfortable retirement. That’s a lot less than what experts had previously suggested, but the average American actually has just under $90,000 saved, which is not quite enough.
Even Americans who have saved more than $1 million are not satisfied. They feel they will need at least $3 million.
But what does it all mean? Well, for starters, a couple retiring at age 70 with $1.27 million in savings can purchase an immediate annuity, guaranteeing themselves a lifetime income of $90,000 per year. A single 70-year-old retiree with the same amount of money can buy a lifetime income of $106,000 a year. And for those with $2 million saved up, they can expect nearly $150,000 per year for a couple and almost $170,000 per year for a single person.
Of course, this doesn’t even take into account Social Security benefits which can increase one’s overall income.
So, while the quest for the perfect retirement fund may seem daunting, it’s not impossible to achieve. It just takes careful planning and disciplined saving – with a little bit of luck thrown in for good measure.
Retirement Planning: How Much Do You Really Need?
When it comes to retirement planning, the first question on everyone’s mind is usually: “How much will I need to live comfortably?” The short answer is that it depends on a variety of factors, including your lifestyle, location, health, and projected expenses.
According to the Social Security Administration, the average benefit for a retired worker is $21,000 annually. However, this figure can increase significantly if you delay claiming your benefits until you turn 70. In fact, the average benefit for those who wait is $33,000 annually. Keep in mind that these figures only consider benefits for retired workers and do not factor in spousal benefits.
If you earn more, your benefits will also be higher. The maximum benefit for a retired worker who waits until 70 to claim is $55,000 annually. And this is in addition to any annuity money you may have.
However, even with these benefits, many retirees find that their actual expenses are lower than expected. According to Social Security data, the median retired household spends only $34,000 annually. Only 25% of retirees spend more than $54,000 each year, and just 12% spend more than $75,000 per year.
Of course, these figures don’t account for location or personal preferences. To retire comfortably, the University of Massachusetts estimates that you need an average of $29,000 per year if you’re single and renting. For couples renting, the average jumps to $41,000 per year. This figure includes housing, healthcare, food, transportation, and miscellaneous expenses.
Considering all of these factors and calculations, the average person believes they need about $130,000 per year for a comfortable retirement. This includes their projected Social Security benefit and the cost of a $1.27 million annuity.
In reality, your retirement needs will vary. Take the time to calculate your expenses and factor in your unique circumstances, such as your location, health, and lifestyle preferences. The key is to plan ahead and make informed decisions so that you can enjoy your golden years without financial worry.
Retirement: Choices and Personal Finance
Retirement is a time for many to enjoy the fruits of their labour after years of working. Ideally, people want to have enough money to last them through retirement. But what if you don’t need as much as you think? What if the key to a happy retirement is not how much money you have, but how well you manage it?
Many people don’t buy annuities because they want to leave money for their children rather than leaving it to an insurance company. We all have choices to make when it comes to retirement savings. However, some people do have a good amount of money saved up, like $90,000 in the bank.
Personal finance is essential to having a financially stable retirement. Personally, I plan to postpone claiming my Social Security until I turn 70 and avoid medical catastrophes. I am not focused on extravagant spending in retirement, especially on discretionary things. I have learned that trying to maintain happiness through material purchases is a “sucker’s game.” Economists refer to this as the “hedonic treadmill,” where people end up no happier but significantly poorer.
I also learned that purchasing big-ticket items like massive houses, fancy cars, and second homes isn’t wise. You think you own these items; however, it’s the other way round – they own you. I have retired friends who have second homes where the cost of upkeep made owning a second home feel like they were still working. I knew people with huge houses that lived in four or five rooms instead of utilizing the whole house.
Expensive cars may be nice, but they can lead to additional car repair bills once out of warranty. Instead, I plan to get a dog companion from my local shelter – a loyal friend who will be grateful in a good and meaningful way.
In conclusion, retirement is an excellent time to reflect and make wise choices regarding personal finances. There are always things that you can do to manage your money better, lead a happy, and meaningful life in retirement.
