Rosalind Evans
How much should you set aside for your golden years?
Milwaukee-based Northwestern Mutual’s recent survey suggests $1.27 million. Yet, the ‘Perfect Number’ varies for each individual.
Many factors come into play: potential life happenings, inflation trends, the unpredictability of the stock market, and personal saving patterns.
Surveys present a broad spectrum of estimates. Charles Schwab’s study pegs it at $1.7 million, LendingTree at $1.07 million.
Within Northwestern Mutual’s yearly Planning & Progress research, varying age groups present different numbers: individuals in their 50s believe they require $1.56 million; those in their 60s suggest $968,000, while the younger generation, those in their 20s, forecast around $1.2 million.
Inflation is consistently pushing these projections upwards. For high-net-worth individuals, the figure jumps to a significant $3 million.
“Prices are steadily rising,” observes Chris Collins, a private client specialist at Northwestern Mutual.
So, how can you determine your ‘Perfect Number’? Let’s glean some insights from financial mavens.
IDENTIFY YOUR PERSONAL SAVING GOAL
Having a savings target is beneficial, even if it’s just for motivational purposes. However, national averages might not resonate with everyone.
Your local expenses, envisioned retirement lifestyle, and outstanding debts, especially mortgages, play a crucial role.
“Universal numbers don’t exist,” comments financial strategist Ashley Folkes from Hoover, Alabama.
To fine-tune your projection, explore sophisticated retirement calculators like SmartAsset or Bankrate that consider diverse factors.
DETERMINE BASED ON WITHDRAWAL RATES
A standard guideline among retirement experts is the “4% rule”: Only withdraw up to 4% from your overall balance each year. While some experts argue for a range between 3% and 5%, 4% is a commonly accepted figure.
To put it in perspective, Bradley Lineberger, a financial consultant with Seaside Wealth Management in Carlsbad, California, explains, “If you have a portfolio worth $1 million, you can reasonably expect to withdraw $40,000 annually, allowing the balance to grow over time.”
Add potential Social Security benefits, and you’re in a comfortable position. Seeking an upscale retirement? A Bloomberg survey indicates the aspirational range between $3 million to $5 million.
A consistent theme among these studies? They all recommend figures in the millions.
ADJUST WHEN NECESSARY
Your ideal savings number might diverge from real-life scenarios. For instance, while many might aim for Northwestern Mutual’s $1.27 million benchmark, data from the Federal Reserve’s 2019 Survey of Consumer Finances indicates that the average retirement savings hover around a mere $65,000.
Factors like changing life situations, income fluctuations, and evolving expenditures can affect your target.
To inch closer to your ‘Perfect Number’, consider strategies like optimizing your investments, downsizing your home, postponing Social Security benefits, extending your working years, or even relocating to tax-friendly regions.
“Expect your goals to evolve with life’s twists and turns,” advises Adam Hubert, a financial advisor with RW Baird in Canonsburg, Pennsylvania. “It seems straightforward, but it’s multifaceted in nature.”
In essence, planning for retirement isn’t about chasing a universal figure but understanding one’s individual needs, adjusting for life’s unpredictability, and making informed decisions. As with many aspects of life, preparation, adaptability, and continual reassessment are the keys to a comfortable retirement. So, while numbers provide a guideline, your unique journey, goals, and circumstances will truly shape your ideal retirement.
