Do You Need A Million Dollars to Retire?
One of the age-old questions for retirement is how much you truly need to retire. An extremely common nest egg goal is $1 million. But is $1 million too much or not enough? The answer is - it depends on multiple factors. Continue reading to learn more about if you need a million dollars to retire based on several factors.
The concern about your nest egg goal is if it will last your entire retirement. With rising life expectancies and the rising cost of living expenses, your retirement savings need to last the rest of your life and be able to cover your monthly expenses. It’s not specifically about the total amount of funds you have saved, it's about the monthly and annual income that your retirement assets will give you.
A rule of thumb from financial planners is to replace 80% of your pre-retirement income to be able to afford the same lifestyle when you retire. However, this is purely dependent on if you plan to have the same lifestyle. You may have plans to travel after retirement, move closer to family, continue working, start a business, or buy a new house.
In addition to where you live and how you live, healthcare costs are extremely important to keep in mind. According to Fidelity's Retiree Health Care Cost Estimate, the average 65-year-old couple that retired in 2022 is estimated to spend $315,000 throughout retirement. Although you will have Medicare, there are still out-of-pocket costs associated. Another consideration is long-term care expenses. There may come a time in your life when you need to live at an assisted living facility, nursing home, or hospice care center so it is important to have long-term care insurance or funds set aside to finance your long-term care expenses.
In addition to your retirement funds, you’ll also have Social Security income to help supplement some of your expenses. If you wait until age 70 to start receiving Social Security benefits, you can increase your benefit amount substantially. This additional income can help offset any additional expenses you may have in retirement.
Ultimately, the desired nest egg amount is fully dependent on your situation, your lifestyle, and your retirement plans. However, the most important aspect of retirement saving is to start early. The earlier you start, the longer amount of time you have to take advantage of compound interest, and the more funds you will have to live off of in retirement.
A knowledgeable and experienced financial advisor will be able to assist you in determining the perfect amount for your retirement nest egg. Our advisors at Total Clarity Wealth Management are here to guide you on a path to a financially sound retirement. Schedule a consultation with us today.