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How Much is Enough? A Perspective on Retiring Comfortably

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Brian Zellers, CFP  , AAMS



  • Determining how much you need at retirement is largely dependent on what type of lifestyle you want to live. There are, however, many other factors that can affect how much you'll need to save.

  • Think of your retirement savings as a bucket. Your goal should be to fill your bucket as much as possible with personal savings to supplement employer retirement plans and social security.

  • Working with a financial advisor to create a retirement plan can help remove a lot of apprehension when it comes to retirement.

         Whether you’re just starting down the road towards retirement or approaching the last exit, everyone needs a retirement plan. When you finally reach the end of your working years, it can be daunting to think, ‘Do I have enough?’

         How much is enough?? It’s a question we hear quite a bit and probably one that is on your mind as you read this. Like many folks, you may be expecting a quick and easy answer.

         Is $2 million enough?

         $4 million? (Thanks inflation!!)

         The answer is, there’s no easy answer. The question you should be asking is, ‘What do I want my retirement to look like?’


        So, is $2 million actually enough? Think of it this way. If you want to spend $500,000 a year, your $2 million in savings will last year around 4 years. Maybe longer if you have it invested properly and Covid 2.0 doesn't happen!

        Now, take that $2 million and spend only $50,000 per year. Invested correctly, it should last you north of 40 years.

        Your lifestyle, your wants, your needs, and your retirement spending are going to dictate how much you need.




         Imagine this- You have a large bucket with a spigot at the bottom. Instead of water, though, you fill your bucket with your savings. For now, (if you aren't retired) that spigot is turned off. Your goal should be to fill up that bucket with as many assets (cash and investments) as you can. One day, you’ll stop filling it, the paychecks will stop, and you’ll need to turn the spigot on. Uh oh!! This can be scary. How much you fill it and how much you have when the spigot turns on is a result of your level of sacrifice during your working years. If you’re like some folks, you may spend a little more when you’re working, and not fill your bucket up as much. That’s ok! You're allowed to enjoy life. The idea is that you can enjoy these fruits of your labor when you are younger, with the understanding that you’ll possibly need to make sacrifices during retirement. You might not be able to turn the spigot on all the way and you’ll need to be more disciplined when the paychecks stop.


        Next, consider the alternative. You are a disciplined saver. Every paycheck you put a large chunk into your accounts at the expense of maybe that nice dinner out on the weekend or a vacation to some tropical island every year. This allows you to fill your bucket up a lot quicker and more fully, though. In this example you’re sacrificing during your working years so that you can turn the spigot on as much as you want it to be opened once you retire. More than likely, if you’re like most folks, you’re probably somewhere in the middle. Sacrifice a bit now, maybe a bit later.


        Think of your retirement funds as a three-legged stool. The first leg, for many folks is social security. I know, I know! Will that even be around in several years?!? (Full disclosure- I believe it will be, but that’s another story.) You'll be able to hopefully count on something. The second leg of the stool is typically some sort of retirement plan through your employer, such as a pension or a 401(k). Of course, not every company offers a retirement plan, but hopefully you’re lucky enough to be able to participate in a plan through your employer. Finally, the third leg is what you are able to save on your own either in a type of personal retirement account, like a Roth or a traditional IRA, some sort of taxable brokerage account, or even just an account at your local bank. Whether it's one, or all three of these, the goal is to have as much in your bucket as you think will be enough.



        Unfortunately, that’s right. There are so many other factors that can affect your bucket and how much you need and how long it will last. Life expectancy, marital status, family structure, tax rates, where you live, debt, charitable goals, estate goals, and your withdrawal rate are all factors that can affect how long your funds can last. With that many variables, among others, you can see that it becomes extremely difficult to project how much you need when you finally decide to "hang it up". That difficulty can lead to a lot of apprehension and anxiety and that's normal! After all, you’ve never retired before (maybe!) and it can feel like driving blind.



           What can remove that apprehension and feelings of worry is having a plan. Working with a financial advisor and developing a financial plan can provide you with a roadmap once you reach the retirement exit. Financial plans, and working with an expert can provide you with something that you can’t put in your bucket, but that may be the most valuable “asset” there is – Peace of Mind!


         One last analogy. You’re watching a scary movie for the first time, by yourself! You don’t know what’s around the corner, who’s hiding in the shadows, or what’s going to jump out next. Now, if you’re like me, you love scary movies. Many folks don’t. Imagine though, you’re watching that same scary movie with a friend who’s already seen it, and every time, right before the big scare, they tell you what to expect. Not so scary now, huh?


         That friend is your financial advisor with your financial plan. And the movie is called retirement. It can be extremely difficult to be able to answer the question ‘How much do I need?’. With the right advisor, and knowing your retirement goals, it can be much easier to answer the question, ‘How can I retire the way I want?’. After all, that should be everyone’s goal.

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