I note with distaste another scare-mongering story about how much you need for retirement. It's only accurate if you're overloaded with debt, haven't saved anything much, and intend to continue a spendthrift lifestyle.
A cool $1 million has long been considered the gold standard of retirement savings. These days, it's only a fraction of what you will really need.
For instance, a 67-year-old baby boomer retiring now with $1 million in the bank will generate $40,000 a year to live on adjusted for inflation and assuming a sustainable withdrawal rate of 4 percent, said Mark Avallone, president of Potomac Wealth Advisors and author of "Countdown to Financial Freedom."
It's worse for a 42-year-old Gen Xer, whose $1 million at retirement will only generate an inflation-adjusted $19,000 a year when all is said and done. And a 32-year-old millennial planning to retire at 67 with $1 million would live below the poverty line.
That's what Avallone, a certified financial planner, calls "million-dollar poverty."
There's more at the link.
The picture painted above is warped and twisted by the out-of-touch-with-reality expectations of so many people. If you're prepared to be sensible in your spending, not expect undue luxury, and live within your means, prospects are nowhere near so bleak. As Aaron Clarey points out in his book "Poor Richard's Retirement" (which we've noted in these pages before), common sense is a big help. Here's an excerpt.
The simplest and most compelling argument against today’s retirement system is that it just isn’t working. We can argue all day about what people “should be doing” or what they “shoulda done,” but we don’t live in “Shoulda Land.” We live in the real world. And conventional retirement planning is failing the majority of people.
Statistics vary widely, but of the 75 million Baby Boomers half do not even have a paltry $100,000 in their retirement accounts. Over a third have less than $50,000. And half the Baby Boomers admit they are going to have to work past 65. Only a mere 15% of Baby Boomers have the required standard of $500,000 needed for a successful retirement, and that assumes a lot of rosy assumptions.
. . .
... it’s painfully obvious Americans simply aren’t saving enough for retirement. Admittedly, most of this was self-inflicted - borrowing more than they could pay back, buying things they don’t need, partying when they should have been saving, taking on student loans for incomprehensibly stupid degrees. We can enumerate a long list of financial sins. But again, the larger philosophical point is not one of morality or lecturing. It’s one of accepting reality. If only 15% of the Baby Boomer generation has managed to successfully retire using today’s modern retirement system and... well... pretty much nobody else, we must design a retirement system that is conducive to the majority of Americans’ economic and financial behaviors, not to mention... reality.
. . .
If we can get rid of our desire for “stuff” the whole rotten system will come collapsing down on itself. Not only will this free us from our slavemasters of materialism, it will do wonders for the American family, their finances, their happiness, not to mention, make retirement a very real possibility for all Americans. It could also (in theory) usher in a new American golden age with higher economic growth, lower debts, accelerated advancements in technology, and a simply better-off society. The only problem is overcoming the innate, genetic addiction Americans have to consumption and materialism.
I highly recommend that you read "Poor Richard's Retirement" for yourself. It's a short book, priced to sell, and well worth the investment of your time and money. Miss D. and I are following a similar philosophy, and so far, thanks be to God, we're doing OK. I hope you will, too, if you follow the same path. Those who don't . . . are likely to have problems.