One of the top fears for people who are starting to prepare for their retirement years is: “Will I outlive my retirement money?”
Retirement can be a scary proposition considering that the majority of Americans do not know the true annual cost of their present lifestyle, or the income that their retirement savings, Social Security, and other investments can generate once they stop working.
According to a recent nationwide survey of 1,000 employed 401(k) participants by a well-known financial services company, the average American estimates they will need $1.9 million to retire successfully. In 2019, the same survey reported the number was $1.7 million. But this year’s pandemic increased the total by $200,000.
Is $1.9 million a realistic figure for retirement? It’s hard to say. The survey didn’t ask participants how they arrived at that figure or what information they used to draw that conclusion. Determining how much money you need in retirement is a process. It shouldn’t be a number that you pull out of thin air.
The process should include looking at your current financial situation and developing a financial plan based on your lifestyle goals, retirement time horizon, outstanding debts, health and family longevity. Your plan should take into consideration all of your potential sources of retirement income, and project what your income would look like each year in retirement.
The earlier in life you go through the financial planning process with a competent financial planner, the greater your ability to make course corrections to get you where you want to be.
A significant figure like $1.9 million does little good if you’re uncertain what it means for your retirement years.
Scott Johnson is the CEO of DecisionPoint Financial LLC. He is a Certified Financial Planner™ and an Accredited Investment Fiduciary. He and his firm provide comprehensive financial planning and investment management services to individuals and institutions. Scott can be reached at (480) 553-6249, or scott@dpplanners.com. For more information, visit decisionpointfinancial.com.
DecisionPoint Financial LLC is a Registered Investment Advisor. All investments involve risk. Risks associated with investing in securities include increased volatility and loss of principal. Past performance is no guarantee of future results. The information herein is educational in nature and does not represent investment advice. All rights reserved. DecisionPoint Financial LLC © 2020.