How much money do you need to retire? That’s about as personal a question as, “What do you look for in a spouse?” or “What is your dream job?” The answer is different for everyone.
So are questions about when you want to retire, how you want to retire (suddenly or gradually) and where you want to retire. There are vast combinations of these and many other variables that serve to make the style and level of retirement different for every individual — even within the same household.
Americans are retiring at a rate of 10,000 per day, which means a lot of people need retirement planning advice.1Financial services firms like ours develop relationships with neighbors and friends in our local community to offer personalized guidance and advice on financial matters. If you’re pondering how much money you may need to retire, please come and see us. Not only can we help you with that assessment, we create financial strategies through the use of insurance and investment products to help you work toward your retirement goals.
Fidelity recently conducted a survey that yielded wildly divergent responses in terms of how much money people think they need to retire. For example, 25 percent think they will need to have saved two to three times their annual salary during their last year of full-time work, while many financial advisors say it’s more like 10 years’ worth of salary saved. Overall, 74 percent of Americans underestimate how much they will need for a comfortable retirement.2
It’s important to keep in mind that issues may arise even if you’ve saved an appropriate amount for your household by the time you retire. Some circumstances — such as the unexpected death of one spouse before the other — could expose the need to replace a lost source of income. This is a possible circumstance where buying a life insurance policy, even long after your children have grown up and are on their own, may still be a part of your overall financial strategy, depending on your personal circumstances. At a minimum, one of the two Social Security benefits the couple was receiving will stop when one spouse dies. A life insurance payout can help augment any lost Social Security or pension benefits to help a surviving spouse maintain his or her current standard of living throughout retirement.3
While some retirement factors are personal, others may be cultural in nature. The most current available data shows that in the U.S., the average white family has more than $130,000 in retirement savings while the average African American household has only $19,000. Over time, disparities in income and personal wealth have an even more dramatic impact: By the time they enter their 60s, whites have accumulated 11 times more in savings than African Americans — on average at least $1 million more in wealth.4
Unequal pay and career opportunities also may impact a woman’s ability to save enough for retirement. To complicate matters further, women tend to live longer. A couple estimating how much they need to retire may make the assumption that they’ll need, for example, 25 years of retirement income. The husband might pass away after 15 years while the wife lives another 15 years on her own. However, their income plan may not reflect a loss of income sources once the husband dies nor increased expenses the surviving wife may incur in her later years of life.5
If you’re interested in estimating about how much money you may need to save each year, try out an online retirement calculator, like this one provided by the U.S. Financial Industry Regulatory Authority (FINRA).6 You also can contact us to schedule a more in-depth retirement analysis.
Content prepared by Kara Stefan Communications
1 Insured Retirement Institute. 2016. “Boomer Expectations for Retirement 2016.” https://www.myirionline.org/docs/default-source/research/boomer-expectations-for-retirement-2016.pdf. Accessed April 28, 2017.
2 Lee Barney. Plan Sponsor. March 6, 2017. “Most People Think They Will Need a Paltry Amount for Retirement.” http://www.plansponsor.com/Most-People-Think-They-Will-Need-a-Paltry-Amount-for-Retirement/?fullstory=true. Accessed April 28, 2017.
3 Jamie Hopkins. Forbes. April 27, 2017. “Why Life Insurance Is Essential for Retirement Planning.” https://www.forbes.com/sites/jamiehopkins/2017/04/27/why-life-insurance-is-essential-for-retirement-planning/#78b4ee9f31cd. Accessed April 28, 2017.
4 Rodney Brooks. Chicago Defender. April 28, 2017. “The African American Retirement Planning Gap.” https://chicagodefender.com/2017/04/28/the-retirement-crisis-facing-african-americans/. Accessed April 28, 2017.
5 LeAnn Bjerken. Spokane Journal of Business. April 27, 2017. “Women face unique challenges in retirement planning.” https://www.spokanejournal.com/local-news/women-face-unique-challenges-in-retirement-planning/. Accessed April 28, 2017.
6 FINRA. 2017. “Retirement Calculator.” http://apps.finra.org/calcs/1/retirement. Accessed April 28, 2017.