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Larry Ellner
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Larry Ellner   My Press Releases

Do You Need a "$Million" When You Retire?

Published on 11/26/2014
For additional information  Click Here

by Retirement Rescue Coaching on Nov 25, 2014

 Imagine saving $1 million by the time you retire. Does that seem like a lot of money?

One million might sound like a large number, but the reality is that it may not be enough to guarantee you’re able to enjoy a comfortable retirement.

Let’s take a look at some of the factors that go into reaching your ideal retirement goals, so that you can get a better grasp on what you should really be aiming for.

How Much You’ll Need to Live On

For the sake of example, let’s assume that you withdraw 4 percent of your portfolio per year, which covers your cost of living during retirement. A retirement nest egg of $1 million will give you $40,000 per year, in addition to any Social Security or other sources of income that you might receive.

That’s a livable income, but not necessarily “comfortable,” especially if you have visions of travel or golf club membership in your golden years, or if you reside in a high-cost-of-living area.

Bear in mind, too, that your expenses can change significantly once you retire. You may be done paying off your mortgage and putting your kids through college, but you could have new costs such as supporting your grandchildren, retrofitting your home for medical reasons, or hiring people to handle the lawn care and housework you were once able to do yourself.

Rather than aiming for an arbitrary goal like $1 million, you’re better off deciding what personal standard of living and expenses you’d like during retirement. Then create a plan that enables you to reach an annual retirement income that can support your ideal lifestyle.

In other words, don’t focus on having a “magic number” in your portfolio. Instead, ask yourself how much money you’d like to live on, each year, during your retirement. Then devise a strategy that can help you create that level of annual retirement income, while minimizing the risk of outliving your money.

Online services like Retirement Rescue Coaching can show you how much money you’re on-track to enjoying during retirement, and give you specific, step-by-step advice about how to maximize this income while also minimizing your risk.

How Long You Plan to Save

Once you’ve chosen an income goal, you’ll need to figure out exactly what steps you should take in order to get there.

A big piece of this puzzle comes from your age (or number of years left until retirement) and your savings rate. Consider how many years you can save up for your goal, and how much money you can commit to saving per year.

By way of example, let’s say you’re a 30-year-old with a starting portfolio balance of $50,000, and you plan on saving $12,000 per year towards your retirement. If you assume your investments grow at a 7 percent rate in tax-deferred accounts, it would take you up to age 54 to reach a retirement goal of $1 million. (Adjusted for inflation, assuming a 3 percent inflation rate, you’d have today’s equivalent of $1 million by age 66).

If you’d like to retire with a larger portfolio, you’re going to need to start saving more per year—especially when you consider that $1 million may not be enough for you.

Use Retirement Rescue Coaching to get an idea of how long it will take you to save for your retirement goal.

How Far Your Savings Will Stretch

Depending on how much you aim to save, when you want to retire and how much you plan on living on each year, you can also estimate how long you’ll be able to live on your retirement savings.

Let’s say that you decide you’d like to live on $100,000 per year. You aim for a $1 million retirement fund, and you plan on retiring at 65. Your savings will last until you’re about 80. Given today’s life expectancies (the Office of Social Security estimates men will live till 84.3 and women till 86.6), there’s a good risk you could run out of money early.

The moral of the story? You’ll need to plan for a retirement that lasts for at least 30 years, if not longer. Again, services like Retirement Rescue Coaching can help you understand what steps you should take today in order to create a more secure retirement.

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