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From the article, the GAO says HALF of people have zero saved for retirement. No pension, no 401k, and no Ira. That’s not just the young, as 30% of households headed by someone age 55 or older have ZERO.
I suppose if you were poor your whole life and didn’t plan to do much in retirement either you could get by on social security. Otherwise, those are pretty scary figures. There’s going to need to be multigenerational homes or something.
It is very easy to understand the origin of the $1M recommendation. The median annual household income is about $56K. The median amount of SS benefits is $16K leaving a gap of $40K. The 4% rule means that a safe withdrawal rate that will last 30 years of retirement will require savings of about $1M.
Of course this guesstimate that only fits some mythical median household. Many retiree households have a wife and spouse both of whom will receive SS and/or pensions. Many retirees work at least part time. Others might do a reverse mortgage or sell their house and live off the proceeds.
What will happen (Is Happening) is that the USA is being built up of LCOL and HCOL areas. Those with low means will settle in LCOL areas and those with more choices will choose not to be where the lower income folks are. It is getting worse faster than we think as the Poor are getting poorer fast, and the rich are getting richer faster because of current policies.
I admire anyone who can live of SS alone. Truth is they typically struggle to do so. Seems like the SS numbers specified are basically a poverty level. So unless one works till one dies, one's Standard Of Living would be very limited.
I guess this is no different than it is now. In our area there are LCOL pockets and Hi'erCOL pockets. Thankfully the latter predominate. The LCOL areas are scruffy, not well kept and look like stereotypical LCOL areas. The Hi'erCOL area are the reverse, they look well managed, nicely kept and the homes reflect pride of ownership.
In our area the Returns of $1m for 25 - 30 years would not even scratch the surface, that is even after one's residence is fully paid for. RE taxes alone on some homes here are $12k a year and up. (Not ours, but some)
It depends on if you have pensions, when you plan to take SS. Do you have other income. What your expenses are. What your quality of life expectations are.
A general rule though is you need 25x your expenses less pension income saved. So if you want to spend $50,000 a year and your SS covers $30,000, you’ll need $500,000 in savings.
It is very easy to understand the origin of the $1M recommendation. The median annual household income is about $56K. The median amount of SS benefits is $16K leaving a gap of $40K. The 4% rule means that a safe withdrawal rate that will last 30 years of retirement will require savings of about $1M.
Of course this guesstimate that only fits some mythical median household. Many retiree households have a wife and spouse both of whom will receive SS and/or pensions. Many retirees work at least part time. Others might do a reverse mortgage or sell their house and live off the proceeds.
and that 40k income assumes 2 things .
1-that you are at least 40% or so in equities
2- that you are not exposed to any of the worst case scenario time frames like we already had
You'd be hard pressed to find a moderately safe place to put your money that returns 4 %. So a million would give you $40,000 and then you take state and federal capital gains off the top of that. How much would you like to have to live on when you retire?
I get tenants apply who are getting a combination of $1600 a month for SS ( that's total for two lifetimes of work). Then medicare gets taken out of that and even with all the parts of medicare, you still need supplimental insurance.
People who get big SS payments are high income people, and they most likely have other savings. A pension is a type of savings account. You don't get a pension unless you've worked and paid into it.
Not to mention, are you going to trust that social security is still there when you retire?
For each of us it would likely be different, how much you need depends on how much you will need in income upon retirement and what debt if any and overhead you will have, will your home and cars be paid off or what will be the cost over the long term for those and other needs. IMO once you have all that figured out, then you might know how much you will need but then comes inflation.
From the article, the GAO says HALF of people have zero saved for retirement. No pension, no 401k, and no Ira. That’s not just the young, as 30% of households headed by someone age 55 or older have ZERO.
I suppose if you were poor your whole life and didn’t plan to do much in retirement either you could get by on social security. Otherwise, those are pretty scary figures. There’s going to need to be multigenerational homes or something.
I think you are borrowing trouble.
Dozens of articles are published every day. Does that mean you and I need to lose sleep over it? No.
If you personally had no savings, no pension, no Net Worth, and were at a standard-of-living that required 5X your projected SS income, then maybe you personally should consider how you are going to make it.
But here we are in this sub-forum: 'Economics > Personal Finance'. Posting here are people who do have savings accounts, and pensions, and accumulated Net Worths, with 401[k]s, IRAs and more.
think it completely depends on your expected quality of life, right? I mean there are some general good guidelines that I think make a lot of sense, but beyond that, it's going to be up to you to decide how you want to spend your retirement years, what you can possibly afford to save, etc
This.
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