Erin Moriarity Explains Why $1M Isn't the All-Purpose Retirement Number
How much do you need to save to ensure a comfortable retirement? The answer depends on many factors, including your cost of living, goals for your senior years and how close you are to retirement. Yet, survey after survey disregards a host of details.
In a recent YouTube video, Erin Moriarity, host of the popular channel “Erin Talks Money,” discussed why we should not adhere to across-the-board estimates such as retiring with $1 million.
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However, if you don’t need $1 million to retire, then what do you need? We’ve broken down a few of Moriarity’s key points below.
Retirement Planning Should Prioritize Needs Over Wants
Moriarity kicked off her argument against assuming you need $1 million to retire by calling out the many surveys claiming to know how much you need in savings. These surveys usually focus on the amount of savings Americans want for retirement rather than the savings they actually need.
Drilling down on your future retirement’s most essential needs versus your most vivid desires will likely lead you to a lower and more realistic savings goal.
You Might Only Need $300K to $700K To Retire, but Only If You Meet Certain Criteria
Moriarity asserted that many households need between $300,000 and $700,000 to retire comfortably. If this sounds absurdly low, that’s because it comes with a big caveat: You need to own a home and it needs to be completely paid off by the time you retire.
“For many households, a genuinely comfortable retirement takes somewhere between $300,000 and $700,000 — in investments, paired with Social Security and a paid-off home,” Moriarity said.
The majority of Americans are carrying a mortgage, according to MoneyDigest. If you’re among them, keep in mind that you could need more money saved for retirement than $700,000.
Your Spending in Retirement Will Depend On Where You Live
Another reason you shouldn’t go by the “you need to save $1 million to comfortably retire” or any other out-of-the-box benchmark is that your cost of living depends on where you live. The cheaper the place, the further your savings can go to cover essentials.
“The cost of living difference between, say, a coastal city versus a rural Midwest town can be drastically different,” Moriarity said. “This could push you all the way from the lower end of the range to the higher end of the range, or completely out of this range depending on your lifestyle.”
Retirement Savings Needs Should Be Customized
A blanket $1 million saved for retirement simply doesn't work for everyone — some of us will need more and some of us will need less. Therefore, it's important to customize the amount you’ll need according to your individual situation. This can be determined by knowing how much to expect in guaranteed income in retirement, such as Social Security benefits.
“If you take one thing away from this video, it should be to go check your Social Security benefits at SSA.gov.,” Moriarity said.
Once you know your guaranteed income, you can explore how much more in savings you will need to have a comfortable retirement that meets not only your needs, but ideally, your wants.
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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