Is $1 Million Enough to Retire?

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I have made it to the 1 Million saved benchmark, and the cost of Heath insurance and up front deductions make it hard to consider retirement, It seems difficult to retire and carry large health insurance cost. We need to get medical costs in the U.S. under control. Or we will all be flying to india, or thailand for major health care
needs. This is the one issue that prevents individuals from being able to retire on less money.

stillworking of CO 5:23PM April 19, 2012

The funny thing is that a "modest" retirement will be just fine for most Americans.
In 2007, the median annual household income was about $50,000 according to the Census Bureau. That's figure is "household income." The average household size in America is about 2.5 persons. So let's do some math. First, let's assume that your household in retirement will be only 2 persons (that .5 of a person in your average household has gone off your payroll). That means an average household perhaps would have spent spent only 80% of the $50,000 annual household income on themselves (this number is probably less). That would be only $40,000 per year. Now, many "experts" say you'll need 80% of your pre-retirement income in retirement (a number which I think is way too high). But let's assume these "experts" are correct. Perhaps then, the average retired couple would need only 80% of the $40,000 to maintain the same standard of living in retirement. That, would be $32,000 a year. Then you get to subtract from that figure all the expenses you won't have after you're retired, like income taxes, FICA deductions, retirement savings, work related expenses, etc. Sure, some things will cost more, health insurance for one, and you'll need a lot more if you're retiring in an expensive place like New York City or San Francisco. But you get the picture.
So it's true that you can retire with "only" a million. And the good news is that many folks will be able to retire on a lot less.
Jonathan D. Edelfelt, author of Who Said You Need Millions? Retirement Strategies for the Rest of Us.
www.whosaidyouneedmillions.com

Jonathan D. Edelfelt of TX 6:58PM September 21, 2009

I think the writer is correct. Purchasing power and cost of living dictate that you need more to retire since people are living longer. Can't depend on interest and SS (for the common folk)anymore. And thats without a mercedes or a beemer. Those that disagree have not given serious enough thought to their future. Probably some "Carpe Diem" hippy b.s., but they're in for a rude awakening in the distant future.

ELI of CA 6:33PM August 19, 2009

I'll take that "modest" retirement. As others have said. anyone who expects more than a "modest" retirement is either dreaming or already filthy rich.

Mike of CA 5:28PM August 11, 2009

You do not need a million dollars, an assumption is made that @ 4% interest return = $40,000, plus SOC SEC @ 1 or 2 times (based on married or single), plus amortization of savings principal over your life expectancy ( how long are you going to live?)would provide actual returns that would moderate any inflation costs and thus yield you an adequate standard of living. The real bottom line is how much do you want to spend or how much do you need to spend to be happy. Realize right now that any savings that exceeds your needs will have little value after your dead, and we will all die. Furthermore,If the government ever gets short on funds and cannot tax it's way to pay entitlements, I would bet goverment assistance whether it be social security or medical care will be based on financial need rather than what is now called a(lie) earned benefit. Now, I do not know how long I might live but I do know that in my early years of retirement I can enjoy my savings, while I would have substantial doubt that in my late 80-90s if I was around, I would actually care (dementia)if I had depleted my savings. Savings are great but I have seen a lot of people work themselves to death and never did get that day in the sunshine.-something to think about.

Dave of IA 12:49AM August 06, 2009

If you think you have to live in a MccMansion and drive high end cars with frequent vacations overseas you will probably need more than a million bucks.
If you live a modest lifestyle you won't need anything like that. First pay off the house and all loans, then pay each credit card off every month. Have zero debt when you retire. Stop eating out and don't fall into the trap of buying gadgets just to keep up with the guy across the street. Start to log where every penny you spend goes and get a clear idea of where your spending the money. Once you know exactly where it's going you can decide if you really need all that stuff.
I did this many years ago and am now retired (at 62) living off my SS and a small pension that gives me an additional $508 less my health insurance of $152. To date I am saving a little money every month so I have not had to touch my IRA's and 401k.
I own a small house south of Boston and have accumulated enough toys over the last 43 years that I don't feel the need for more of them. I can walk down the street and take a walk on the beach FOR NOTHING. There is all kinds of entertainment available for the cost of train fare into town.
Not everybody can do this but you would be surprised how many do.

bobc47 of MA 2:36PM August 04, 2009

Closing in on 67 we have that 1.6 mil in retirement funds even after the downturn, no mortgage, and no other debt. It did take a lot of work and some sacrifice. Put 4 kids through parochial school and college. Got riffed at age 53 - went into business for myself. Not a lot of financial pressure as had home paid for at that time and some savings. Getting debt free early in life was a priority as I could never understand the logic of paying $1 in interest to get 25 cents in tax savings. I see people who took their ss early and thus get 25% less than they would have, and also in their late 60's still with a substantial mortgage payment. They continue to spend beyond their means so their modest IRA's are going to be depleted by the time they are 75 if not sooner. Soc. Sec. and my wife's small pension bring in about $45,000 a year. I got screwed out of my pension from my employer of 25 years. Fortunately I maxed out my 401-k. I plan to work part-time until 70-1/2 when I have to start taking the minimum withdrawals. Dividends from my large NML whole life policy helped us fund Roth IRAs ever since they were available. I also continue to fund my Keogh plan to the max. Our main indulgence is dining out but we favor moderate priced restaurants and take advantage of every coupon and deal. It is nit free to eat at home. We just bought a new car as I am convinced car prices now are at a historical low.

Jake of OH 12:57AM August 01, 2009

Perhaps you should plan on taking care of yourself because it is the right thing to do. There are simply too many of us to blindly spend today. Court action and potential monetary implications are simply an excuse to not take personal responsibility. All Ponzi schemes eventually collapse. Abdicating your financial planning to the government will not work long term.
And for all those who think that you stash away a few dollars a year and your retiement is assured - that is theoretical. I have saved every year, saw the beauty of compounding and saving early. I also saw professionally managed assets take a dive leaving me in my 50s further away from my retirement than I was at 40. Risk can not be completely eliminated. $1M sounds closer to adequate until many markets simultaneously take a dive and your asset base is worth 25% - 40% less than a year earlier while you are in your 50s.
Social security and pension plans were originally designed when people had a shorter life span, and retirement would be a few short years. Expecting to retire before 60 and live for 25 years - that may be unrealistic for an entire society.
The glass is still half full. Despite setbacks, I still enjoy a life far better than 80% of the people on this planet.

Leslie of WA 3:14PM July 01, 2009

Here's the deal. You save your money and someone will take it.
Many senior citizens with assets are being put into guardianships and a good portion of their assets are being used to pay attorneys and guardians and for nursing home care when the citizen could have used their money to live in their own home or with family.
This is a form of exploitation as it often does not benefit the ward. And they will take everything including the homes. Then medicaid comes after the home later for recovery and new laws are being passed so they can come after the adult children.
So what is the point in saving a whole lot of money. Plus it makes them an easy target for abue and exploitation.

Elder Abuse Victims Advocates of TX 3:15AM June 30, 2009

before I say anything, I just want to say that SK-CPA has made one of the best posts I have ever read.
for the math: If you save $10,000 every year for 45 years at 5%, you will end up with roughly $1.6 million in the bank using compound interest (which is more realistic as to how interest and savings accumulate). At the very least, you can live with that. The problem is that to save $10K a year solely for retirement is a tough thing to do for a lot of people. If you have a mortgage and kids, then a lot of your savings are lost to current expenditures.
To be able to successfully save for retirement and balance current needs requires a lot of discipline and a lot of things will need to be foregone - something a lot of people don't want to hear/talk about.
A lot of the more prudent older people I have spoken to strongly believe that society will either decline into a worse state than it is, or that a self-correction is around the corner. The hope is that the younger generation will be so disgusted by the older ones, they will quickly reject the idea of spending on credit as freely as people are doing now.

wiseguy of FL 9:50PM June 26, 2009