There is a level of prestige associated with one million that other numbers don’t possess.
Many consider one million dollars to be the magic number for retirement. Have it and you’re in good shape; fall short and you’re in for a tough time. But is that true? Do you really need a million dollars in order to retire?
The answer is an old favorite: it depends.
Here are some things to consider:
According to the Society of Actuaries, for a married 65-year-old couple, there is a 45% chance of one person reaching age 90 and a 20% chance one will reach age 95. Your retirement funds may need to sustain you for a few decades, not merely a few years.
Having just enough for retirement today could mean years of struggling down the road if inflation is not considered. For instance, based on an average inflation rate of 3.5%, prices would double every 20 years. Or to put it another way, $1,000 today may only have the spending power of $500 in 20 years.
Health costs tend to rise as you get older. Even with healthcare benefits, a healthy 65-year-old couple could spend upwards of $250,000 on out-of-pocket medical expenses. Medical expenses are typically the biggest and most unpredictable retirement expense.
What do you want to do in retirement? Travel? Spend time with family? Estimate the costs associated with your desired lifestyle because how you spend money in retirement may be more important than how much you have saved for retirement.
What can you do now?
First, you will want to estimate your retirement savings needs. Then look at the three factors that influence your retirement savings outcome:
There’s no one-size-fits-all retirement plan, but with careful planning and self-restraint, you can experience a financially stable retirement, whether or not you hit millionaire status.