$ 1 Million enough for retirement?
Why even $1M may not be enough for retirement
Excerpt:
"Thirty years ago, $1 million was a huge amount of money," says Haitham "Hutch" Ashoo, CEO of Pillar Wealth Management, in Walnut Creek, Calif. "Today, given today's lifestyles and costs, it isn't so much money." Why not? "It translates into $40,000 to $50,000 (annually) in sustainable revenue," says Joe Heider, regional managing principal for Rehmann Financial Group in Westlake, Ohio. "That is not that much money on an annual basis." Heider says that 10 to 12 years ago, when people earned a lot more on their investments, $1 million could generate $70,000 to $80,000 a year in retirement income. But with interest rates as low as they are, that's not really feasible. Still, that's not to say that no one could live on savings of $1 million. Not everyone will need that kind of cash in their retirement kitty, financial planners say. It all depends on your lifestyle — the one you're living now, and the one you want to live in retirement. It also depends on your investment returns, taxes and inflation. "I think it depends on how much money you're going to spend," says Tim Courtney, chief investment officer at Exencial Wealth Advisors in Oklahoma City. "A million is not like $1 million 20 years ago or 30 years ago. If you're wanting to spend $50,000 a year or less from your investment portfolio, $1 million will probably get it done for you. "If you want more than that, $1 million is not going to provide that for you," he says. Otherwise, you run the risk of depleting your savings before you die. "Everything is relative," says Clarence Kehoe, executive partner in the accounting firm Anchin, Block & Anchin in New York City. "For some people, I would think $1 million would be more than enough. For other people, I can tell you some of these clients spend more than $1 million in a year. It depends on the person, their lifestyle and what they are used to."Comment: Our target is a bit beyond this. Hope to retire approx. December 2015.
I see $1 M generating $ 40,000 per year in income. Or more conservatively $ 30,000 per year
ReplyDeleteGood to see the finance guys catching on to the actual yields that stocks and bonds have been giving for the past 15 years.....
ReplyDelete(sorry, but my not humble enough opinion is that they're more than a touch slow to catch on... and count on many Christian financial guys to catch on in another decade or so)
Here's my take on the retirement income issue: Basically one has social security and the amount one has saved in a 401K. One may also have saved in say a Roth IRA or regular IRA or a non-tax sheltered brokerage account.
ReplyDeleteRetirement is different today because of no-defined pension plan (most people). My dear old Dad who knew nothing about investing - but he worked 44 years for the phone company ... (AT&T),. For him and Mom that was enough ... debt free and a pension
Now different. We have to manage it ourselves.
I don't think $ 1M is enough with interest rates and dividend rates so low.
Debt free is critical.
$ 7 million? : A 20-year-old could need to save $7 million for retirement
ReplyDeleteSomeone retiring now in 2014 with $1 million at age 65 can safely withdraw $43,600 a year. However, [because of inflation], today’s 20-year-olds will need over $7 million to have that same lifestyle when they retire. In 1970, they would only have needed $166,000 in retirement to have a similar purchasing power for the rest of their life.
[For this calculation, Marotta assumes an average inflation rate over the next 45 years of 4.5%.]
To get close to saving $7 million, a 25-year-old with a starting salary of $50,000 would need to save about 14.65% of their salary throughout their career