Forget a Million Dollar Retirement – ​​Focus on It Instead | Personal finance


(Kailey Hagen)

A millionaire’s retirement isn’t all it’s supposed to be. A million dollars seems like a lot of money, but when you spread it out over a few decades, it doesn’t get you that far. If your goal is to have a comfortable retirement, you need a better plan than just aiming for that arbitrary savings goal. Here’s why.

Why saving $1 million might not be enough for retirement

If you spread $1 million over 25 years of retirement, that gives you a budget of just $40,000 per year. Coupled with social security and possibly a pension, this could be enough to fund a comfortable lifestyle today. But many people won’t retire for decades.

Image source: Getty Images.

Inflation will continue to drive up costs, and years later $40,000 won’t buy as much as it does today. In addition, most workers are not eligible for a pension and Social Security trust funds are running out. This could potentially lead to benefit reductions in the future.

People also read…

  • Vince Gill and the Eagles return to Tulsa, displaying their trade force status
  • Michael Overall: Reintroducing Tulsa to a “Forgotten” Frank Lloyd Wright Masterpiece
  • ‘It’s hot. We’re thirsty’: Spectators face high booze prices at Southern Hills PGA Championship
  • Jack Nicklaus ‘amazed’ by Tiger, adds Woods’ desire to play until 40 ‘maybe a little bigger than mine’
  • Watch now: Kristin Chenoweth reveals her connection to the Girl Scout murders in new documentary
  • “How did these people not know that?” : The Broken Arrow senior was denied the right to wear feathers at graduation
  • DNA points to longtime prime suspect in 1977 Girl Scout murders, sheriff says
  • Toddler orders 31 McDonald’s cheeseburgers on DoorDash, surprising Texas mom
  • Several dead and injured in shootings in Houston, Southern California – a day after the Buffalo shooting
  • Legislature takes control of federal COVID-19 relief funds from state
  • The city never informed homeless advocates and service providers of the plan to get the homeless off the streets
  • Broken Arrow area crash kills 1 person; another driver, 17, did not give in, soldiers say
  • Mackenzie Donihoo cuts ties with Oklahoma
  • Looking for restaurant recommendations during the PGA Championship? Here are Scene staff’s picks for places to eat
  • Southern Hills area owners 1st in line for PGA Championship: ‘A once in a lifetime opportunity for all of us’

All of this suggests that workers today will need more savings to cover their retirement expenses, especially if they are planning a long retirement. You may need $2 million or even more, but making $2 million your retirement savings goal isn’t much better than having a $1 million savings goal. . If you want to be sure to save enough, you need a personalized retirement plan.

How much should you save for your retirement?

There are several ways to estimate the costs of your retirement. One of the simplest is to save 25 times your annual salary. This is supposed to help your money last at least 30 years, but it may not work that way. If you plan to make a lot of major purchases or travel a lot in retirement, you’ll want to create a cushion in your budget for these expenses.

You can also estimate your retirement expenses by thinking about your estimated annual costs and how many years your retirement will last. Multiply your estimated annual expenses by the number of years you will be in retirement, adding 3% per year for inflation. If that sounds too mathematical, a retirement calculator can do the hard work for you. It will also tell you how much you need to save per month (and overall) to cover these costs. Again, you might want to build a cushion if you’re planning on major purchases.

Remember that you probably won’t have to finance your retirement yourself. Many workers are eligible for Social Security, and if you are married, your spouse may also qualify. You can also get a 401(k) match from your employer.

Try to estimate the amount you will receive from these sources and subtract it from your total savings goal. For example, if you think you need to save $600 per month and you receive $100 per month as an employer 401(k), you only need to save $500 per month on your own.

If your savings goal seems out of reach, there are a few things you can do. First, try to find more money to spend on retirement. You can try cutting expenses, starting a side hustle, or asking for a raise.

If that’s not possible, delaying retirement might work. It’s not ideal, but even a delay of a few months can make a big difference. This gives you more time to save while shortening the length of your retirement.

Delaying Social Security can also help, because each month past your full retirement age, you avoid claiming increases in your benefits until you hit 70. If you plan to live to be 80 or beyond, you’ll likely get more money waiting to sign up. only by starting as soon as possible. But if your health isn’t optimal, starting earlier is probably smarter. You can estimate your social security benefit at different starting ages by creating a my social security account.

Try a few different scenarios until you find a plan that works for you. Next, see if you can set up automatic retirement account contributions so you don’t forget to make them. Also set a time to review your retirement plan each year. Take this opportunity to reassess your investment strategy and rethink your retirement goals. Once you have a proper plan, you’ll feel much more confident that you’re saving enough.

The $18,984 Social Security premium that most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help boost your retirement income. For example: an easy trick could earn you up to $18,984 more…every year! Once you learn how to maximize your Social Security benefits, we believe you can retire confidently with the peace of mind we all seek. Just click here to find out how to learn more about these strategies.

The Motley Fool has a disclosure policy.


About Author

Comments are closed.