Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some continued
education for some credentials I maintain and it occurred to me that we all
could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
(The following article
may make you feel a little better about your modest retirement. Mark)
How Many
Americans Actually Retire With a Million Bucks?
Saving $1 million (or more) for retirement is a
great goal to have. Putting that much aside could make it easier to live your
preferred lifestyle when you retire, without having to worry about running
short of money. However, not a huge percentage of retirees end up having that
much money. In fact, statistically, around 10% of retirees have $1 million or
more in savings. The majority of retirees, however, have far less saved. If
you’re looking to be in the minority but aren’t sure how to get started on that
savings goal, consider working with a financial advisor.
What Does the
Average Retiree Have Saved?
The Federal Reserve’s Survey of Consumer Finances
tracks retirement savings data for different age groups in the U.S. According to the most recent survey that was
completed in 2019, the average retirement savings by age breaks down like this:
·
$426,000 for those aged 65 to 74
·
$357,000 for those aged 75 and older
As you can see, those numbers are well below the $1
million mark. They represent how much the average person 65 and up have saved
in retirement accounts, including 401(k) plans and Individual Retirement
Accounts (IRAs).
If you look at median figures, the numbers change
even more. The median represents the middle number in a group of numbers. The
Federal Reserve data shows that 65 to 74-year-olds have a median of $164,000 in
their retirement accounts while those 75 and older have $83,000 saved for
retirement.
These numbers are from 2019 and may not reflect any
retirement gains (or losses) retirees have experienced in the last few years.
The next Survey of Consumer Finances is set to be released sometime in 2023 and
it may paint a very different picture of retiree savings with the impacts of
the COVID-19 pandemic and higher inflation factored
in.
What Is the Average
Retiree’s Net Worth?
Net worth is a measurement of your assets against
your liabilities. A higher net worth indicates that you have more assets than
debts and that’s a good thing when it comes to retirement.
In terms of the average retiree’s net worth, the
Federal Reserve data puts it at approximately $1.2 million for those aged 65 to
74. The average net worth drops to $958,000 for those aged 75 and older. The
data measures a variety of assets and debts,
including:
·
Retirement accounts
·
Bank account balances
·
Certificate of deposit accounts
·
Savings bonds
·
Stock holdings
·
Cash value life insurance
·
Managed assets
·
Business equity
·
Unrealized capital gains
·
Primary mortgage debt
·
Home equity loans and lines of credit
·
Student loans
·
Vehicle loans
·
Credit cards
·
Other installment debt
If you’d like to calculate your own net worth, you’d
simply add up all of your assets and subtract your debts. You can use that
number as a guide for measuring your own net worth alongside other Americans in
your age group.
Is $1 Million Enough
for Retirement?
what percentage of retirees have a million dolllars
Financial experts have long advocated saving at
least $1 million for retirement. Whether $1 million is enough can depend on:
·
Your desired retirement age
·
How long do you expect to live in retirement
·
Your preferred retirement lifestyle
·
What you expect to spend on basic living expenses
and healthcare
·
When you plan to take Social Security benefits
For some retirees, $1 million may be more than
enough to enjoy a comfortable lifestyle. Retirees who plan to relocate to
another country, for example, may find that $1 million goes much further when
it comes to paying for housing, utilities, food or health care. They might be
able to retire on $500,000 instead.
On the other hand, $1 million may leave you with a
savings gap if you would like to live a retirement lifestyle that includes
plenty of travel, expensive hobbies or providing financial support to a child
or grandchild. Health care can also take a big bite out of your savings if you
have a chronic illness or you require long-term care at some point.
Long-term nursing care is generally not covered by
Medicare. While you can apply for Medicaid to pay for long-term care,
eligibility is determined by your assets. If your net worth is too high, you
may have to spend down some of your assets before you can qualify. Purchasing
long-term care insurance or a hybrid life insurance and long-term care policy
can help you to prepare financially for that scenario.
If you’re ready to be matched with local advisors
that can help you achieve your financial goals, get started now.
How to Save $1
Million for Retirement
If you’d like to save $1 million or more for
retirement, you’ll need a clear plan to reach your goal. Planning starts with
doing some math to determine how much you need to save monthly or yearly to
reach your goal, based on when you plan to retire.
Say, for example, that you’re 30 years old. You’d
like to retire at 65 with $1 million saved. You make $70,000 a year, pre-tax
and are starting with $0 in savings. Assuming you’re investing and earning a 7%
annual rate of return on average, you’d need to set aside 10% of your income
each year. That also assumes you plan to live until age 95 and spend $2,900 a
month in retirement.
If you’re saving 10% of your pretax income each
year, that works out to $583 per month. Now, what if you’re starting at age 35
instead? In that case, you’d need to bump your savings rate to 15% of your
income or $850 a month instead.
Using an online retirement savings calculator can help you work out how much you need to save to retire
with $1 million. You can also try some of these tips to boost your savings
total:
·
Enroll in your 401(k) if you haven’t already and aim
to contribute at least enough to get your full employer match.
·
Increase your 401(k) annual contribution rate by the
same amount as any annual raises you receive.
·
Max out your workplace retirement plan each year if
possible and consider opening a solo 401(k) or SEP
IRA if you’re self-employed.
·
Supplement savings with a traditional or Roth IRA
and a Health Savings Account (HSA), if you have one
available through your high-deductible health plan.
·
Take advantage of the Retirement Saver’s Credit if
you’re eligible, which can free up more money that you can save.
·
Choose low-fee investments to maximize your returns
and review the fees you’re paying in your 401(k) or IRA regularly.
·
Use found money, such as tax refunds or rebates, to
add to your retirement savings.
·
Fine-tune your budget as
much as possible and pay down debt so you have more money to save.
Those are just a few things you can do to increase
your savings efforts if you’d like to retire with $1 million. What you decide
to do should be unique to what your individual financial goals are
and how much money you think you need for your goals. You may benefit from
working with a professional who can outline what a plan looks like to hit your
individual goals.
The Bottom Line
what percentage of retirees have a million dolllars
The majority of retirees are not millionaires but
it’s possible to reach $1 million in savings if you’re strategic in your
approach. Getting an early start can be one of the best ways to reach your
goal, as you’ll have more time to benefit from compounding interest. Comparing
different investment options and understanding your risk tolerance is also essential
if you’d like to achieve millionaire status by the time you retire.
Retirement Planning
Tips
·
Consider talking to a financial advisor about
whether retiring with $1 million is realistic or if you should be aiming for a
different savings number. If you don’t have a financial advisor yet, finding
one doesn’t have to be difficult. SmartAsset’s free tool matches you
with up to three financial advisors who serve your area, and you can interview
your advisor matches at no cost to decide which one is right for you. If you’re
ready to find an advisor who can help you achieve your financial goals, get started now.
· If
you expect Social Security benefits to be part of your retirement picture, it’s
important to understand how much you might be able to collect. You can receive
your full benefit amount when you retire at your normal retirement age, but
it’s possible to take benefits as early as 62. Doing so, however, can shrink
the amount you’re able to receive. On the other hand, you can increase your
benefit amount by waiting until age 70 to apply. Deciding when to take Social Security benefits is
another topic you may want to discuss with your financial advisor.
(As with any of these informative articles, anyone who needs someone to talk to about
this
very subject contact me and I can direct you to a knowledgeable advisor).
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