Friday, June 11, 2010

Is $1 Million enough for Retirement?

$1 Million: Too little to retire on? by questions whether being a just a millionaire is enough. The article reports that many advisors recommend retirement savings of $1.5 to $3 million.

To me, the answer is, "It depends." Whether a million dollars of savings is enough may be related to other factors:
  • Standard of living. For example, a person living on $20,000 per year would do very well with a million dollars in savings. On the other hand, someone requiring $100,000 would find a million dollars in savings insufficient if it were the only source for retirement funds.

  • Guaranteed income streams. People with pensions or annuities that cover a significant portion of monthly expenses may require less in retirement savings. For example, a person that has an annual pension of $50,000 and annual living expenses of $60,000 would not need a million dollars in retirement savings.

  • Good medical and long term care insurance. For us, a big uncertainty in retirement is the cost of medical and long term care. A significant medical event or extended nursing home stay can be very costly. Good insurance plans can significantly reduce out of pocket costs and, therefore, reduce the amount of funds needed in retirement savings.
  • In 2009, the estimated average retirement savings was below $100,000. So even if it's not enough, a million dollars is probably a good starting place to be :-)

    For more on Reaping the Rewards, check back every Friday for a new segment.

    This is not financial or retirement advice. Please consult a professional advisor.

    Copyright © 2010 Achievement Catalyst, LLC

    No comments: