$1 Million Doesn't Cut It for Retirement?

Discussion in 'Economics' started by Debaser82, Mar 16, 2010.

  1. Conventional wisdom says you need to save $1 million for retirement.

    That target may be easy to remember, but it falls short of the true cost of what's required for post-career comfort. Longer life spans, the threat of inflation and the uncertain future of Social Security benefits make this long-touted savings advice inadequate for most, advisers say.

    Scottrade recently polled 226 registered investment advisers on the topic and found that 71% don't believe $1 million is enough for the average American family. Most said families need to save double, or more than triple, the amount.

    "Younger generations, especially, need to set their retirement goals higher than other generations and start saving as early as possible," says Craig Hogan, Scottrade's director of customer-relationship management and reporting.

    The survey solicited opinions about the current investment habits of Americans. Questions were broken down by generations to determine advisers' opinions on average investment goals in today's dollars for various groups.

    Generation Y (ages 18 to 26) needs to save at least $2 million, according to 77% of advisers. Forty percent put the figure at $3 million.

    Nearly half of advisers (46%) said Generation X (ages 27 to 42) should at least double the $1 million goal. Twenty-two percent suggested more than $3 million.

    For Boomers (ages 43 to 64), 35% recommended $2 million to $3 million. Thirty percent suggested $1.5 million to $2 million.

    According to Scottrade's analysis, seniors are the only generation that may come close to needing only $1 million. Forty-four percent of advisers said $500,000 to $1.5 million is sufficient for average families in that age bracket.

    Bill Smith, president of Ohio-based Great Lakes Retirement Group, is among the advisers who took part in the survey. As he sees it, too many people rely on online retirement calculators. Much of that guidance uses a target based on making do with 70% to 80% of pre-retirement income.

    "I've never been a big fan of planning to earn less in retirement than you are making now," he says. "I'd like to see an individual continue making the same amount of retirement as when he was working. Who wants to set themselves up in retirement to make less?"

    While most people will spend less when they retire, inflation or the onset of a long-term illness could wipe out savings without proper protection or planning.

    That said, there's no secret to meeting a retirement goal: maximize your contribution rate, have a greater tolerance for risk when you're younger and downshift to bonds as you grow older. Successful preparation, however, begins with setting a realistic goal and understanding your true financial picture.

    Debt needs to be carefully considered as well as leaving money for the kids.

    "There are two extremes," Smith says. "There are individuals who say, 'We don't care if we have anything left the day we die -- we are OK with that last check bouncing when we are gone.' Then there are the individuals who don't do anything in retirement because all of their decisions are made around, 'I've got to leave it for the kids.' "


    :confused: :confused: :confused:

    If you own 1 million $ debt free and it's not enough I say step of from your cloud and welcome to the real world spoiled brat. :)
  2. depends on what inflation does in the future.
  3. When you retire, you eat less, buy fewer clothes put less miles on the car. You can fix things yourself where before you may have had to hire someone (something as simple as the lawn).

    Many expenses are cut right off the top the day you leave work.
  4. S2007S


    Ill back that article up with this great info,

    43% of workers have less than $10,000 saved.

    How can $1 million not cut it when 43% of workers have less than $10,000 saved, I actually think $1 million can work for retirement however the chances of 98% of the population meeting that goal is probably less than 0.5%.

    By Chavon Sutton, staff reporterMarch 9, 2010: 8:21 AM ET

    NEW YORK (CNNMoney.com) -- The percentage of American workers with virtually no retirement savings grew for the third straight year, according to a survey released Tuesday.

    The percentage of workers who said they have less than $10,000 in savings grew to 43% in 2010, from 39% in 2009, according to the Employee Benefit Research Institute's annual Retirement Confidence Survey. That excludes the value of primary homes and defined-benefit pension plans.

    Workers who said they had less than $1,000 jumped to 27%, from 20% in 2009.

    Confidence in ability to save enough for a comfortable retirement hovered at 16% of respondents, the second lowest point in the 20-year history of the survey.
    A drop in the bucket

    "Americans' attitudes toward retirement have clearly tracked the economy the last couple of years, and that seems to be the case in 2010," said Jack VanDerhei, EBRI's research director and co-author of the survey, in a statement.

    The percentage of workers who said they have saved for retirement fell to 69%, from 75% in 2009.

    While VanDerhei attributed the decline in current savings rates to job losses, mortgage problems and the suspension of corporate 401(k) matches in 2009, he said the economy isn't entirely to blame.

    "In previous years, there were a whole lot of people who had nothing to begin with," said VanDerhei.

    The gap between what Americans have saved and what they'd need for retirement is forcing workers to prolong their working years.
    The ultimate guide to retirement

    According to the survey, 24% of workers said they have postponed their planned retirement age in the past year, up from 14% in 2008.

    But even as fears over health care costs and job prospects mount, the survey found that only 46% of workers have tried to calculate what they need for a comfortable standard of living in their golden years.

    "People just don't want to think about this," said VanDerhei. "Everybody thinks they're too young to think about it, until suddenly they're too old to do anything about it."

    401(k) match coming back?

    In general, financial planners say that retirement savings, including Social Security benefits and pension, should be large enough to provide about 80% of pre-retirement income.

    To reach that target, "most Americans need to be saving within the healthy range of 6% - 10% (of their salary)," said Beth McHugh, vice president of workplace investing for Fidelity Investments.

    But the survey found that 54% of the workers with some form of savings said that they have less than $25,000 stowed away.
    How Uncle Sam can help

    Delaying retirement, though not ideal, is a good sign that people are finally facing reality.

    "People have figured out that they don't have enough money," VanDerhei said. "Still, I'd rather they bite the bullet today, rather than take the chance that they'd have a job when they are 65."

    The EBRI surveyed 1,153 U.S. workers and retirees, age 25 and older, in January. To top of page
  5. Lethn


    I think this is actually a sign that inflation is in effect already personally but that's just me.
  6. You have 40+ years to gather what you want, pay for it and be as close to debt free as possible. Do that and you won't have to worry about having millions of dollars for retirement.
  7. it is completely unrealistic. if anything people are going to be in a million debt.
  8. clacy


    $1mm is more than enough, unless you desire to continue to lead a somewhat extravagant lifestyle.

    As someone else pointed out, I would imagine 80%+ have FAR less than that and they seem to survive.
  9. GTS


    Here how: a lot of people aren't going to be enjoying their retirement
  10. I'm in my mid 30's. My house is paid off, I paid cash for my suv.

    A million dollars? Why do I need a million dollars.
    #10     Mar 16, 2010