Josephine Nesbit
·2 min read
Successfully saving for retirement doesn’t mean having $1 million in the bank. Experts say you need to plan for your retirement to last several decades and base your budget around living to be 100 years old.
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According to the Schroders 2023 U.S. Retirement Survey, working Americans think they need $1.1 million to retire, but MarketWatch said it’s not as simple as having a standard amount for every single person. Not everyone will live the average life expectancy, which is about 77 years in the U.S., per the Bureau of Labor Statistics.
“You don’t want to plan for the average life expectancy. You want to plan conservatively and plan for expenses through age 100,” Matt Fleming, wealth adviser executive with Vanguard, explained to MarketWatch.
Vanguard estimated people should look to have 75% to 85% of their income for retirement years, Fleming said. Look at potential sources of income — 401(k), IRAs, pensions, savings and Social Security — and additional income streams like rental properties, annuities or inheritance. It’s also important to check insurance policies, MarketWatch reported.
A study from the TIAA Institute and George Washington University found that respondents with strong longevity knowledge were more likely to save more for retirement. They also find it easier to make ends meet in retirement and were more likely to try estimating how much they need to save.
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Using the original 4% benchmark, MarketWatch stated that $1 million in savings and investments would allow you to spend $40,000 (adjusted for inflation) each year in retirement with little chance of outliving your money.
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This article originally appeared on GOBankingRates.com: Experts Say This Magic Number Is Key to Healthy Retirement Savings — And It’s Not $1 Million
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In the article by Josephine Nesbit dated November 17, 2023, the focus is on successful retirement planning, debunking the notion that having $1 million in the bank is the sole indicator of a secure retirement. Instead, the narrative emphasizes the need for strategic planning, taking into account factors such as life expectancy and the necessity to plan for expenses up to the age of 100.
Key Concepts Discussed in the Article:
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Life Expectancy Planning:
- Experts advise against planning for the average life expectancy, currently around 77 years in the U.S.
- Conservative planning is recommended, considering potential expenses through age 100.
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Financial Target:
- The Schroders 2023 U.S. Retirement Survey suggests that working Americans believe they need $1.1 million to retire.
- Vanguard suggests aiming for 75% to 85% of income for retirement, considering various income sources.
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Income Sources for Retirement:
- Vanguard recommends considering income from 401(k), IRAs, pensions, savings, Social Security, rental properties, annuities, and inheritance.
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Longevity Knowledge Impact:
- A study from the TIAA Institute and George Washington University indicates that individuals with strong longevity knowledge are more likely to save more for retirement.
- Having longevity knowledge makes it easier for individuals to estimate how much they need to save and manage their finances in retirement.
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Spending Benchmark:
- MarketWatch uses the 4% benchmark, suggesting that $1 million in savings would allow for an annual retirement spending of $40,000 (adjusted for inflation) with a low risk of outliving the savings.
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Additional Considerations:
- Checking insurance policies is highlighted as an important aspect of retirement planning.
The article underscores the importance of a holistic approach to retirement planning, considering not only the financial target but also factors such as life expectancy, income sources, and the impact of longevity knowledge on saving habits. It encourages individuals to explore diverse income streams and regularly review insurance policies as part of a comprehensive retirement strategy.
