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Is $500K the magic number?

By Barbara Whelehan · Bankrate.com
Saturday, May 4, 2013
Posted: 6 am ET

If you have a half-million dollars or more, your outlook on retirement is likely sunnier than if you have less, according to a survey by Maritz Research, a marketing consulting firm. The company conducted an online survey of 500 recent retirees -- those who retired within the past three years, as well as 500 near-retirees -- those who plan to retire within five years.

Among those who have not yet retired, just 35 percent who expect to have assets of at least $500,000 worry about having enough money to last through retirement, compared to 54 percent of near-retirees who have less than that amount.

Those who already have retired within the past three years seem to feel more secure overall, with 20 percent of the more affluent concerned about having enough to last through their lifetime. Nearly twice as many retirees who have less than $500,000 (39 percent) expressed concern.

What you should know about social security benefits"Recent retirees are more optimistic regarding their financial security than near retirees, perhaps because they have made decisions and removed the uncertainty," according to the study.

Nearly two-thirds of retirees work with a financial adviser, and most of them hired one before they retired. More than half of the imminent retirees (57 percent) work with an adviser now.

Conquering retirement jitters

Even though I'm a generally positive and hopeful person, I sometimes get the retirement jitters -- that feeling of anxiety that accompanies the thought that no matter how much my husband and I save, it won't be enough. It's an occupational hazard. I read retirement news all the time, and am hyper-aware of all the warnings coming in about the need to have an extra quarter-million dollars for health care costs, in addition to a colossal nest egg that will last 30-odd years.

To calm my nerves, I meditate, take long walks at night and practice yoga. But probably the most worthwhile action my husband and I took recently was visiting a Certified Financial Planner professional to get a retirement-readiness assessment.

She ran our numbers through various scenarios and Monte Carlo simulations, which attempt to account for all the unpredictable stock market moves that can happen over the years. The upshot: The worst-case scenario is that we'll run out of money when we're in our 80s. The best case scenario has us leaving a significant legacy for heirs.

That's the problem with not knowing all the variables such as market returns, inflation rate, how long we'll live, how well our investments will do, how our health will hold up, etcetera. Uncertainty fuels retirement planning angst.

Even so, since that meeting, I feel pretty good about our prospects. But when I make the transition from near-retiree to already-retired, I suspect I'll feel even better.

***

Follow me on Twitter: BWhelehan.

Barbara Whelehan is a co-author of "Future Millionaires' Guidebook," an e-book for Gen Y written by Bankrate editors and reporters. It is available at Amazon, Barnes & Noble, iBookstore and other e-book retailers.

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30 Comments
JJ Martin
July 02, 2013 at 10:53 am

Don't forget about the devaluation effect of inflation on savings. As the government continues to print money to cover deficit spending, at some point inflation will roar to life, wiping out the value of your savings no matter how much you have saved.

Dano
July 02, 2013 at 9:09 am

There is not enough money you can save, that corporate interests can't get their hands on with slick products and deals. We as Americans must stop buying into the idea that commercially growth wealth is good for you and the economy. Every entity that professes to grow your wealth, is definitely grow their wealth at your expense. The trick is not saving enough money, but how you use what you have. Sure, if you have the 250K+ McMansion plus it's expenses, then you are already stuck and the vultures are already circling over head. A new paradigm in housing, consumption and future financial planning, must occur. So many Americans believe they have wealth based on the constant dogma that everything in the dream is good. The hedge fund money is often betting against the sustainability of financial system.

Dano
July 02, 2013 at 8:32 am

I get it, if you don't express your comments in banking terms, you will not get your thoughts published. OBTW, my son is a VP at Chase and is working under these direr current conditions.

JT
July 02, 2013 at 12:39 am

Auto has it right:
"$500k is not nearly enough to retire. Neither is $1million.."

If under 40, you will need to have saved over $1 million to have a stable and worry free retirement.
EX: Age 40, $35k salary, Current retirement savings: $25k current contirbution to retirement savings per month: $250 Rate of return on that: 6% estimated inflation: 3% planned age of retirement: 65 (meaning 20yrs in retirement)Income needed in reitrement: $30k This calculation does not include a pension or soc security benefit and includes a rate of return while in retirement on your savings of 6%. TOTAL NEEDED: $1,053,137

This is a real life analysis.

Russell
June 29, 2013 at 7:05 pm

"To [maintain standard of living] an individual with a annual income of $100,000/year will need more money than an individual with a $50,000/year salary."

Equating income to standard of living is the fallacy that will keep retirement a distant dream for many. Someone who makes $100,000/year and lives on $30,000/year only needs to plan on the latter as a standard of living in retirement. And has a much easier time saving for that. It's those who let their "standard of living" creep up with their income -- or faster than it! -- who have to plan on a large nest egg, even while crippling their ability to save.

davidv
June 21, 2013 at 3:08 am

There is no one-size-fits-all number for retirees. The objective should be to "maintain your standard of living." And to do so an individual with a annual income of $100,000/year will need more money than an individual with a $50,000/year salary.

You may also be able to back off retirement savings if you have a cash flow from other sources: social security, pensions...

james eckler
June 19, 2013 at 2:05 pm

These "magic numbers" for retirement savings really are not very helpful. The vast majority of "expected" funding for retirement will come from Government (Medicare, Medicaid, and Social Security). What happens to these plans, which will be the majority of the funding, will be the first determinate of need. The second determinate will be what happens to Federal, State, and local taxes. We know they are all going up, but by how much? The third determinate is the rate of return on investments. If the rate is 1% versus 10%, that is a $45,000 per annum difference in income, or $900,000 over a 20 year period. The last determinate is what happens to inflation.

Eric Gomes
June 19, 2013 at 10:50 am

5 million is more than adequate... You might be looking at minks and fur coats if that's the case...

auto
June 17, 2013 at 9:16 am

$500k is not nearly enough to retire. Neither is $1million..

If you're 40 right now or younger, you'll need at least $5million...

tunaTHEbig tuna
June 08, 2013 at 10:02 pm

After reading the comments I see most people are clued in

too bad the writer thought the OWS crowd was their readers

ahahahhahahahahahahahahahahaa