Over this summer I had the pleasure of attending a family reunion in South Dakota. We packed up our three kids, two dogs, bikes, swimsuits, baseball gloves and hit the road. Six hours later, we were welcomed warmly by 57 of my relatives from Minnesota, Iowa, Arizona, and Illinois. Over the next few days, we enjoyed each other’s company and shared stories about life. It was truly a great time had by all.
After finding out what I did for a living (I’m an advisor at Vector Wealth Management), one of my relatives approached me with a worried look on their face. “I know you don’t want to talk business during vacation, but,” they said. Apparently, a friend told them, that no one should retire unless they have at least a million dollars saved up.
What they were getting at, is a question I hear all the time; how much does someone need to retire?
First, I encouraged them, as I do most of my clients, to not focus on a specific “right” amount of money, at least not yet. Rather, consider a few factors and give some though to what “enough” and “retirement” means to you.
- Everyone’s situation is different. It’s cliché but true. I have met people who are retired and very happy who have just one to two hundred thousand saved and will never run out of money. And, I have met people who have multiple millions of dollars and may run short in old age.
- Think about inflation. Look at your pension and social security, will it cover your needs 10, 15, 20 years down the road? Consider that while Social Security does have a cost of living adjustment, not all pensions do. What this means for some, is the establishment an IRA or other investment account to hedge against inflation may be prudent.
- Spending is not linear. You will likely spend more in your 60’s than in your 80’s. This is not complicated economist’s only math. Put simply, as most people age, expenditures for big ticket items and activities like travel may diminish.
The sunshine and fresh air coupled with our conversation reframed the worry my relative had around their retirement. While this wasn’t going be the last discussion, having some say and perspective around what is “enough” helped to put them at ease, as I hope it does you.
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