Will a Million Dollars Be Enough?
Will a Million Dollars be Enough?
Everyone dreams of saving a million dollars for retirement. That amount used to be the gold standard when calculating how much money was needed to retire and live comfortably. In today’s world, though, that amount may not be enough.
First, most people don’t consider inflation when planning for retirement. The rate of inflation is rising; it could soon reach an annual rate of 4%. If that happens, in twenty years, $1,000,000 would be worth $500,000 (and only $250,000 in forty years.) If you expect to maintain the same standard of living you did while working, you probably will be withdrawing money from your retirement account(s) each year. How long will it take before your retirement savings will have dwindled to an uncomfortably low amount?
That depends on the decisions you made about your retirement funds and how much inflation affected your savings. Did you have a well thought out plan for retirement that weighed the effect of taxes, healthcare needs as you aged, inflation, and family situations that will arise? Most people haven’t considered all the issues–issues that will affect a comfortable and secure retirement.
Few companies offer pensions anymore and social security probably won’t cover expenses. So, what is your plan to ensure a comfortable retirement?
It’s not surprising that most people don’t have a plan. Many believe their 401k or IRA plus social security should cover it. But most people haven’t calculated how the value of today’s dollars will change in twenty years. And, what about other expenses such as healthcare and taxes? Those are factors that will likely to derail anyone’s plan.
The second major issue you need to consider is when to retire. The average life expectancy for a man is 79 and for a woman it’s 81. Statistics show a married couple will average more than $250,000 in medical expenses after they retire. If one spouse lives to 92, will there be enough money to cover medical costs or nursing home/assisted living expenses without jeopardizing the financial welfare of the other spouse? Have you considered that in your plan?
For those who started saving late or may not have enough, now is the time to make adjustments by putting more money in the right places to work for you. And, consider postponing retirement to help off-set any shortage. Even if you choose part-time work, most baby boomers have skills that will transfer and they often find something more enjoyable with less stress than their original career. Either way, have a plan customized to meet your needs.
It’s highly advisable to ask a financial expert who can show you the way. If you have worked with a financial planner, you hopefully have a retirement blueprint that covers areas including: healthcare, taxes, inflation, estate planning, charitable giving, insurance, risk management, cash flow, budgeting and investment strategies. It all starts with a budget – knowing how much monthly income you will need or want in today’s dollars. An independent financial planner, someone with your best interest in mind, should be asking about your wants and needs before creating a customized plan that will work for you.