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How Much Do You Need for Retirement?

This is a guest post from Crystal of Budgeting in the Fun Stuff: A Personal Financial Blog about the Next Financial Step. It’s an open fiscal diary and a personal finance blog rolled into one.

According to this Yahoo! Finance article, $1 million is no longer the target retirement amount.

Scottrade polled 226 investment advisers and this is what they thought each age group should shoot for:

Ages 18-26 (Generation Y) – 77% of advisers responded that they should shoot for at least $2 million, 40% thought $3 million sounded better

Ages 27-42 (Generation X) – 46% thought $2 million, 22% suggested more than $3 million

Ages 43-64 (Baby-Boomers) – 35% suggested $2 – $3 million, 30% recommended $1.5 – $2 million

Ages 65 and above (Seniors) – 44% thought that $500,000 – $1 million would be enough

Let’s just say, I am not surprised that $1 million wouldn’t be enough for my generation. I was surprised that these adviser recommendations were so close to what we had already decided based on retirement calculators and our own personal conclusions.

According to these results, my husband and I should be shooting for about $2 million, which is exactly what we had already decided in addition to my husband’s pension. We figure that we will be able to live better than we do now off of 3% of those accounts plus 70% of my husband’s normal earnings, which is what the pension will supposedly provide. We are currently on the right track, but who knows what our investments will actually produce?

Well, no one can know for sure, but we use online calculators to help us determine what our future amounts might be (like this Roth IRA calculator or this 401k calculator). We calculate using an 8% rate of return on the Roth IRA and 401k since they are heavily invested in high-equity mutual funds. We then calculate using a very conservative 5% rate of return for our Scottrade account since this will be used to bridge the gap between our actual retirement dates and age 60 – rather have too much than too little, right?

Did this article catch you by surprise? What were your retirement goals? Are you on track for the amount these advisers suggest?



  1. Retirement?? I’m saving for a certain part of my life, but I’m not ready to call it retirement. I think they will have a completely different name for it by then. I’m 34 and have at least 30 more years to go. I believe I will need 1-2 million because I will still be doing something on the side. I guess I’d better eliminate my debt so I can start saving :-)

  2. We call it retirement simply since we’ll be able to retire from our full time jobs (we’re in our mid-late 20s and have 25 years left). We’ll probably have side jobs too. My husband is already a sports official in his “free” time and has loved it for more than 8 years…I don’t see him giving that up unless he can’t run anymore. I plan on volunteering full time with the HSPCA and Meals on Wheels. I know I’ll be doing something since sitting around the house doesn’t sound appealing…

    Good luck on your debt!

  3. Let’s see $2 million in 30 years, ignoring interest rates, that puts me at $67,000 per year. I better get to cracking on graduation right now :-D.
    I picked up a book at the library about this “A Million is not enough.” Didn’t get the chance to read it yet, but I think I should have fun with the numbers just to see what I would need to do to ensure I reach this mark.
    Thanks for the reminder

  4. Assuming I still work till 65 (currently 34), the number is roughly $3M in todays dollars or $7M in the future. The numbers don’t surprise me too much, but I imagine they catch most people by surprise. I don’t think people in general realize how much money is needed to generate a steady stream of income similar to their paychecks. Unless you’ve done the calculations, you’ll be in for a rude surprise when you try and retire.

  5. I do call it retirement, but I am more pessimistic than most. I am assuming there will be no social security and no pension. If I can’t pay for it, I don’t expect it to be paid for.

    For several years I was shooting for $3mil. But then a couple years ago I dug into the escalating cost of health care and factored in not just my life span but that of my wife. Now, my goal is $5 mil. Honestly, it is a stretch goal but hey, I’ve got nothing better to do till then!

    • @LeanLifeCoach, It’s better to be a pessimist than an optimist when it comes to planning, right? We also are planning on receiving no social security…that’s not to encourage them to take it away, but I rather plan heavy too.

      We include the pension in our calculations simply because my husband is a teacher. The pension motivates him through the tough days and is a major benefit of working for the state. If they take it away, we’ll have a lot bigger problems than retirement…

      Good luck on your $5 million goal! Why not aim high?

  6. I prefer to refer to myself as a “Man of Leisure” as opposed to retired. The new background is much nicer.

    Leanlife coach, I admire your attitude as relates to shooting for 5 mill. I’m part of the leading edge of the boomers. So I have a defined benefit pension that serves me well. Haven’t yet had to dip into my separate investment accounts for daily living expenses.

  7. It did and did not catch me by surprise.. I knew by the time I was ready to retire inflation would have taken its toll.. Though I wasn’t expecting it to be to this magnitude. Granted I always planned on socking away a very LARGE amount of cash to retire by 50, but I still was just not expecting them to be this high. If my previous goal was to have 2 million in savings by the time i retire, the impact of these stats may change that to about 2.5, 3 million.

    And I agree, What not aim high!?:)

  8. Funny, these number can’t mean much without knowing what income the respondent has, right? Need to replace about 80% of income. Subtract amount that social security will cover. Then multiply by about 25. $1M = $40k/yr. That’s enough for someone retiring having made as much as about $80K.

    • @JoeTaxpayer, I don’t know what they consider an “average American family”, but that’s what the numbers are based on according to the article.

      I know that it is common to calculate retirement based on 80% of income, but I like to use 100% to be conservative. I also don’t take social security into account.

      Of course, how much you need for retirement is a personal choice, so you can use whatever numbers you like. I just thought that these were great general suggestions. :-)

  9. Keep in mind that retirement only has to cover your expenses + wants. It doesn’t have to replace your current income. I don’t know about you but I plan on having no debt at all when I retire. Without my current mortgage our expenses are only about 20k a year. Replacing expenses is much easier than replacing income assuming you are debt free.

  10. I’m not surprised. Of course whoever is making money off of investing will recommend very high numbers due to an, uh, slight conflict of interest. If we compare the goals to reality, we’ll note that the median net worth (and that’s including home equity) is not even half of $500,000 for the 65+ group. If we remove home equity, it is even worse than that.

    There’s there’s the small issue of inflation which is going to make future numbers look pretty dramatic. In 40 years, $1M is just not what it used to be. In fact figure 3% inflation. That’s a doubling time of about 24 years, so let’s just figure two doubling times. So if we say we need $1M today, we’ll need $4M in 48 years.

  11. Crystal,

    As others have pointed out, your retirement income doesn’t have to replace your working-life income. It just has to cover your expenses + wants. Your husband has what’s known as a “defined benefit” pension plan, which is considered the Cadillac of pension plans. It simply doesn’t get any better. In all likelihood, his pension alone will be enough for the two of you to live comfortably. By the time you retire, you should easily be able to live on 70% of your current budget, because your current budget includes many expenses that you’ll no longer have to pay for after you retire, such as a mortgage, saving for retirement, saving for kids’ educations, and life insurance. Without those items weighing down your budget, you should easily be able to live on 70% of your current income.

    Furthermore, you’ll be getting income from Social Security. Everybody likes to talk about how it’s bankrupt and collapsing and blah blah blah, but the truth is that there will be at least SOMETHING there. They might move the eligibility age out 2 years, they might decrease benefits slightly, but you’ll still get SOMETHING from it.

    I guess my point is that you and your husband could opt not to save a single penny for retirement, and you’ll be just fine, because of that gold-plated pension. Most of society doesn’t have that kind of protection. Please realize how fortunate you are to have that kind of guaranteed-for-life, fully-indexed income stream that you never have to worry about outliving.

    So I guess my question is, why in the world would you think you need $2 million ON TOP of such a rich pension entitlement? What are you planning to do – put gold plated spinners on your wheelchair? Impress the other ladies at Bingo with your diamond-encrusted dentures? :) Please make sure you’re not living too leanly now in the interest of saving waaaaay more than you need for retirement. That pension relieves you of the burden us normal, pensionless folks have to deal with.

    • @Kevin, I don’t want to have to depend on my husband’s pension. I never want him to feel like he has to continue in a job for years just so we can afford to retire. It’s not guaranteed yet, so I like to plan like it doesn’t exist.

      Plus, we live on two incomes, so having a pension that is 70% of his income isn’t the same as having 70% of our income. I don’t make alot, but it counts. :-)

      Your comment of gold-plated spinners made me really laugh…I even called my husband over and read your comment out loud.

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