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One supposes that "having enough for retirement" is only tangentially related to being old, being retired, or being... anything... other than being financially independent. Financial independence means having enough wealth that one does not need to work... whether one is a 90-year-old with dementia in a care-facility, or a 19-year-old doing a "grand tour" of Europe.
Most people presumably delay retirement until some kind of defined-benefit sustenance is possible - typically Social Security. Whether we're supported, at least in part, by a pension, an old-age benefit such as SS, our adult children, a reverse-mortgage, or whatever else - this is different from being financially independent. Sure, it's an excellent and essential means of sustenance; I do not disparage it! But it's not financial independence. Financial independence is the wielding of considerable liquid wealth, wherein, the wealth replaces what would have been labor-income. In other words, capitalism!
So when the financial industry says that you need $X millions for such-and-such, they're not talking about, how to build a decent and dignified life on Social Security. They're talking about, how to become the sort of high-net-worth individual who doesn't need an income, who doesn't care about inflation or housing prices, who doesn't really care about much other than the stock market. And yeah, such an individual might choose to retire.. or not.
In a similar way, talk of "I want to retire" doesn't mean that I yearn to reach the age where my pension kicks-in, or where I can partake of a 4% safe withdrawal rate and have my portfolio last for 30 years. Neither does it mean that I could afford to send my children to Harvard (if I had any...). Instead it means having enough money to endow a building at Harvard, with my name on it. To endow a gallery at the Metropolitan Museum of Art, like the Sackler family... without, you know, ending up like the Sackler family.
A. What do you want out of life in retirement, how much does that cost now, and how much will it cost for the rest of your realistically possible life assuming 4% average annual inflation (I think that is a reasonable average assumption, looking historically)?
B. What is the minimum on which you could live normally, and does your soc security cover that?
If you have enough for A and B, plus some wiggle room (ie, an emergency fund and/or something like real estate that you could use as a collateral for an emergent loan such as a HELOC), plus a plan for a possible long-term care situation, then you are probably all set. There is no specific number for that; only you can figure out what the number is for you.
Example of my decision process:
I can only think in terms of monthly income. I am solo, own the condo(s) in which I live, and right now, am perfectly happy with $4k per month. I am 63 & have planned my finances to correspond to at least $4k per month in today's money but assuming 4% annual inflation, for the next 25 years; after that, I should be happy with an equivalent of $2k per month in today's $, because I'll be living in a single place, and not traveling any more (if I am still alive).
If I were to live at the minimum but still enjoy it, I could do it now on $1k per month. This minimum figure is less than 1/3 of what I'd be getting from soc security if I were 70 & if soc security paid its full estimated benefit.
My long-term care plan is a specific inexpensive but comfy nursing home abroad (which nursing home I have toured, ascertained that they would admit me emergently if needed, and have a specific detailed plan in place about it with my extended family that would haul me there if needed).
Also, I should say (as the regulars on this forum know since I have mentioned it about ten million times :-) that I am not an investor (I do have a small bit in stocks, but not counting on that to feed me; just to satisfy some minor curiosity about investing), and since I was self-employed for a long time, I had set up my own annuities for retirement.
In order to have (mostly delayed) fixed annuities paying about $4k per month for 10 years (I'm 63 now, have fully retired at 60), with a 50% step-up in 2025, and further step-ups to compensate for inflation, I paid a little over $1 million total in annuity premiums, to purchase various annuities throughout my 50s. For a little over $1M, I was able to set up to get an annuity payout of $4k/month at the age 55-64, $6k at the age 65-69, $6.5k plus soc security at 70-79, $8k plus ss at 80-84, $10k plus ss at 85-89, and $13k plus ss at 90+. That is what a little over $1M buys by way of immediate + delayed (laddered) fixed annuities if they are purchase when the person is in her 50s.
In addition to being known in this forum for being the annuity lady, I think I am also known for going off on a tangent frequently... but I MUST share this! :-)
You know what I just did? I recently bought the complete 1989/1990 season of the tv series ThirtySomething on 6 dvds for $3 at a library sale, so I just watched an episode from Sept 1989, which I remember having watched when I was 29 at a friend's home (I didn't own a tv at the time). It features the mother of one of the characters, aged 63 in the episode (my current age, although I really think 63 year olds at that time looked older than we look now), played by a character actress Elizabeth Hoffman. I looked up the actress, and she is alive, now aged 96!
Whoa :-). It really doesn't seem so long ago that I watched that episode 34 years ago, more than half my life ago... or, maybe in some way it does... I don't know, but looking at it this way, it seems entirely normal for a person to live to 96+... I'm thinking how much money I had spent over that time, over the past 34 years, on regular daily expenses. If I exclude the condos and annuities that I bought during that time (and which I won't be buying any more), maybe just under $900k altogether? So, if that is any guide for the future, and let's say cost of living has quadrupled since 1989 - that would mean, with my patterns of spending that haven't changed, I would spend about $4M if I live to 96. Ok, my annuities would cover that (not counting soc security).
So, one way to look at it. Consider how much you spent in the past 35 years or so, and multiply four times. Do you have a way of covering that?
No one in our families ever had close to a million dollars and they all did fine in retirement. What most had was a paid off home and enough social security/pension to cover their small monthly expenses.
DH retired at age 52 in 1992. All that was available at that time were IRAs.
Expenses have more than doubled. Needs have diminished
A million invested needs to throw off 4-5% annually. And grow a tad. With that and SS and maybe a pension anybody should be fine without getting into the principle.
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