Experts Provide the Magic Number To Healthy Retirement Savings
Successfully saving for retirement no longer means just having $1 million in the bank, though that's still a good baseline goal to shoot for. Instead, experts say you need to plan for your retirement to last several decades and base your budget around living to be 100 years old.
According to a survey by Charles Schwab last year, the majority of Americans actually believe they need $1.8 million to retire comfortably. However, it's not as simple as having a standard amount for every single person. Not everyone will live the average life expectancy, which is about 77 years in the U.S., per the Bureau of Labor Statistics.
Matt Fleming, wealth adviser executive with Vanguard, told MarketWatch, "You don't want to plan for the average life expectancy. You want to plan conservatively and plan for expenses through age 100."
Here's a new "magic number" to consider in order to do that.
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A Better Retirement Goal
According to Fleming, Vanguard estimated people should look to have 75% to 85% of their income for retirement years. Look at potential sources of income — 401(k), IRAs, pensions, savings and Social Security — and additional income streams like rental properties, annuities or inheritance. It's also important to check insurance policies.
A study from the TIAA Institute and George Washington University found that respondents with strong longevity knowledge were more likely to save more for retirement. They also find it easier to make ends meet in retirement and were more likely to try estimating how much they need to save.
Using the original 4% benchmark, MarketWatch stated that $1 million in savings and investments would allow you to spend $40,000 (adjusted for inflation) each year in retirement with little chance of outliving your money. Granted, that is not a whole lot of money per year — especially if you live somewhere with a high cost of living — so the more retirement savings, the better.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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