New Magic Number for Retirement

[srblanco7]

WSJ Article reporting the results from a NW Mutual survey -

The results of the survey say it'd take $1.46M to retire comfortably. It's worth noting that this was approximately $1M more than the average survey participant's nest egg.

The article also hits on the theme that "anxiety about retirement is sky high" - in addition to not running out of money, health care and long-term care add to the list of worries.

Recognizing that there are multiple factors that would determine the required size of a nest egg (e.g, where you live, marital status, age/longevity, inflation & expected returns) is the survey outcome reasonable? too high or low?

[LivingAlmostLarge]

Also people forget that so many still have pensions. It's crazy how many peope 65+ have pensions even small pensions make a huge difference. People have pensions from being a flight attendent. All these private companies used to pay out pensions. It's not like now where every job unless it's govt or military don't have pensions.

[disneysteve]

The results of the survey say it'd take $1.46M to retire comfortably.

Using the 4% withdrawal rate, that would get you $58,400 to spend in year one of retirement. I think that's a reasonable number for many people. Personally we couldn't live on that unless we sold our house and moved out of state, but for many, that would probably work.

[disneysteve]

I also wonder if the $1.46M number was what people actually said or if it was the average or median of the answers.

[Fishindude77]

I think the majority of retirees do so on a whole lot less than this and somehow manage.
There are currently lots of retired and just retiring folks with pensions which helps a lot, but those numbers are falling fast. 20-30 Years from now the number of retirees with pensions will be significantly less.

[riverwed070707]

I think its weird to assume everyone is retiring on the stock market and with the same number of years to live. $1.46M invested is not the same as $1.46M in cash is not the same as $1.46M in real estate. Similarly, retiring on $1.46M at 45 is not the same as retiring on that amount at 70. As usual, the answer to this question is "it depends"

[disneysteve]

I think the majority of retirees do so on a whole lot less than this and somehow manage.
There are currently lots of retired and just retiring folks with pensions which helps a lot, but those numbers are falling fast. 20-30 Years from now the number of retirees with pensions will be significantly less.

Absolutely. You also have to factor in the age of retirement. If 65 or more, they've got Medicare. If 62 or more they could have SS and might have retiree healthcare through their former jobs. Healthcare is the big stumbling block for many but the ACA has largely fixed that. If not for ACA coverage, I wouldn't be retiring this year because the cost of coverage would have been way too high.

[srblanco7]

I also wonder if the $1.46M number was what people actually said or if it was the average or median of the answers.

Went back and looked at the article and didn't see a clear response to this question. I did note another interesting tidbit - which is that people who already had more than $1M in savings indicated it'd take $4M for them to retire comfortably. Noting that the $1.46M (average/median) from all respondents was about $1M more than the average of what the survey respondents had saved, this would seem to reinforce the theme of "retirement anxiety".

[bjl584]

Largely, it depends where you live and what sort of lifestyle you want to maintain.
Hopefully your genetics are such that afford you good health in your golden years as well.

I guess more is always better.

[kork13]

I also wonder if the $1.46M number was what people actually said or if it was the average or median of the answers.

Sounds like they averaged the responses to the question of how much they believed they'd need to be comfortable. $1.46M is too precise to have likely been the median response. And of course, "comfortable retirement" is a highly subjective, and will mean different things to different people.

But really, the range of $1.5M is pretty reasonable in general terms, especially when combined with SS later in life.

As for the retirement anxiety, that's totally, completely, and understandably normal. The unknown is always scary -- nobody really knows how much they'll need. But even if the average person only has $500k in their 40s or 50s, they can keep working for another 10-15 years, keep saving, double (or more) their stash, and combine it with SS to be just fine.

[ua_guy]

This is where I have a hard time with coming up with numbers. Depending on the day, I can either be confident that I'm on track for a comfortable retirement, or my heart can be in my stomach, wondering what I've done with all my money for the last 20 years.

What does "$1.46M" actually mean? Is that net worth, all assets combined? Or just funds available in retirement savings, IRA's, 401k's etc, PLUS other assets which are not considered in that number?

Does it assume a paid-off, forever home?

If married, does that number actually need to be multiplied by 2?

At what age does it assume that number needs to be available, and how long is it expected to support the retiree?

Does it include SS?

[disneysteve]

Retirement anxiety is totally normal and it probably results in a lot of people working years longer than they really need to.

I'm retiring June 8 and I’m definitely anxious about it even though every calculator, our CFP, and our CPA say we are just fine. Still until we are actually living without my work income for a while and I see it in action, I’ll be a little uneasy. And that’s with $3.5M.

[ua_guy]

I've found retirement calculators are a great way to induce retirement anxiety.

Here's one from Bankrate:
https://www.bankrate.com/retirement/...an-calculator/

And here's another (I like the format) from Vanguard:
https://investor.vanguard.com/tools-...ome-calculator

Specifically, the factors of anxiety inducement are the expected rate of return (look at the difference between 5 and 7%, especially if you are younger). Also, look at the percentage of current income needed for retirement and what effect that has.

Be sure to run the numbers at least once with "include social security" unchecked - as I believe that could vaporize in the next 20 years.

[Fishindude77]

Retirement anxiety is totally normal and it probably results in a lot of people working years longer than they really need to.

I'm retiring June 8 and I'm definitely anxious about it even though every calculator, our CFP, and our CPA say we are just fine. Still until we are actually living without my work income for a while and I see it in action, I'll be a little uneasy. And that's with $3.5M.

You'll be good.
I've been out of the workforce a bit over (5) years and in hindsight, probably should have bailed sooner.
Buying private health insurance stinks but it's not nearly as bad now as it was when I first quit, went from $18k to about $10k annually. I go on medicare in under a year which will result in some savings and in about two years I'm going to be of age to get full SS which will be nice additional income we've been living without.

[disneysteve]

You'll be good.
I've been out of the workforce a bit over (5) years and in hindsight, probably should have bailed sooner.
Buying private health insurance stinks but it's not nearly as bad now as it was when I first quit, went from $18k to about $10k annually. I go on medicare in under a year which will result in some savings and in about two years I'm going to be of age to get full SS which will be nice additional income we've been living without.

The ACA has been a godsend for early retirees. It’s given us an affordable option to bridge the gap before Medicare.