We’ve seen a lot of clients tackle retirement throughout the years, and frankly, we would have to say that what you need really depends on you.
Some clients have retired with relatively little in assets, but they have managed to live very fulfilling and comfortable lives thanks to an extra helping of self-discipline and a series of good spending decisions.
On the other hand, we’ve seen people retire with $1 million or more and blow through the funds in record time, due to one too many splurges, indiscriminate handouts to family members, and serious tax and investment mistakes.
So take a look at Michelle Singletary’s column for the Washington Post. She describes meeting up with a woman nearing retirement who felt doomed retiring with “just” $1 million in her retirement accounts. To most people, $1 million is an awful lot of money. They would be thrilled to retire with that much in the bank. So what gives?
Well, it is a lot of money, but in today’s low interest rate environment, that $1 million generates only $40,000 per year in sustainable income (e.g. sustainable means you can make it last the thirty or more years you may spend in retirement, through good markets and bad). What’s more, you need to be sure your nest egg will stand up to an unexpected illness, prolonged market downturn, or hefty long-term care expense that could blast a hole in your retirement budget.
The simple fact is that, in meaningful ways, today’s retirement is a lot more uncertain and precarious than the reality our parents had to deal with.
Here’s what I think is the moral of this story. It takes a lot of money, and a good amount of planning, to retire today. You can get by on much less, but more is better. Whatever the amount, you need to make your spending, lifestyle and investment decisions very carefully. If you’re unsure of what that means, please consider getting expert help from a Certified Financial Planner or other professional. It will ensure your money lasts as long as possible and more importantly, help you avoid stress and feel more confident that you are on the right track for a comfortable retirement encore.
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