The ludicrous "you need a $million to retire" mantra financial companies try to tell you.

[iamwhatiseem]

I see this kind of thing a lot in my Youtube feed, because I watch financial stuff.. so these things show up a lot.
And it is almost always sponsored by Fidelity or another retirement custodian company.
Because they want as much of your money as you can possibly give them.
If people needed $1 million to retire - screw that - if people needed $500,000 to retire - NO ONE WOULD BE RETIRED.
The average net worth of people in America at age 64, removing the lowest 5% and the top 5% - is only about $200,000. And that includes the value of their home.. which for far too many people - that IS all the value they have.
So if you needed that much money - they would all still be working.

Even more absurd is companies like Fidelity tell 30 year olds - who are just starting out with children etc. - that they should have at least $50,000 in retirement savings. By 35 years old - $200,000. GTFO. No one is going to be able to do that.

My rant for the day

 

[Lisa558]

This is true. The goal should be to have your home paid off (or close to paid off) by the time you retire. If you have no mortgage payment, an individual should be able to get by with the basics on $3000 a month or so. Two-thirds of that could come from social security, and the remaining third could come from a 4% SWR on a balanced portfolio of $300,000.

If you want to include some luxuries - travel, restaurants, etc. - then you’d need a little more.

 

[Harpy Eagle]

It depends upon how your are funding your retirement. If it is all self funded with just your investments then I am not even sure a million would be enough if you live for another 25 to 30 years

An initial investment of 2 grand with 400 a month added give you 100 grand after 15 years at 4% At 6% it is pushing 120,000.

It is hard to do that when you are young with kids. My wife and I 15 years ago had zero retirement savings. My Marine Crops pensions was all we had, and it is barely 2400 a month. Fast forward to today and we are pushing 400 grand in our 401ks and in the 5.5 years when we retire that should be in the area of 750,000 or so.

 

[Harpy Eagle]

This is true. The goal should be to have your home paid off (or close to paid off) by the time you retire. If you have no mortgage payment, an individual should be able to get by with the basics on $3000 a month or so. Two-thirds of that could come from social security, and the remaining third could come from a 4% SWR on a balanced portfolio of $300,000.

If you want to include some luxuries - travel, restaurants, etc. - then you’d need a little more.

That is good if you want to live in the same place for your whole retirement.

 

[iamwhatiseem]

That is good if you want to live in the same place for your whole retirement.

And most people do.

 

[iamwhatiseem]

It depends upon how your are funding your retirement. If it is all self funded with just your investments then I am not even sure a million would be enough if you live for another 25 to 30 years

An initial investment of 2 grand with 400 a month added give you 100 grand after 15 years at 4% At 6% it is pushing 120,000.

It is hard to do that when you are young with kids. My wife and I 15 years ago had zero retirement savings. My Marine Crops pensions was all we had, and it is barely 2400 a month. Fast forward to today and we are pushing 400 grand in our 401ks and in the 5.5 years when we retire that should be in the area of 750,000 or so.

The percentage of people who "self fund" their retirement is about 10%.
I am assuming you are talking about self employed?
And even then, only 3.5% of Americans will receive no SS.

 

[Lisa558]

That is good if you want to live in the same place for your whole retirement.

No, you can take the equity you build up in one location and apply it to your new location. Better yet if you plan to retire in a lower-cost area.

I‘m right outside DC, where a townhouse is easily $700,000 - $800,000. I could retire to Florida in a seaside condo for half that - and pocket the rest. Then let’s say after 5 years, I’m bored with Florida and want to go to North Carolina. I simply take the cash from the Florida sale and use it for my new NC place.

The key is to be mortgage-free by retirement.

 

[okfine]

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[Lisa558]

Or…you don’t have to buy a retirement home with the equity from your paid-for house at all. Once you have paid off the mortgage from your primary home, you have all sorts of options, while still needing no more than $300,000 in savings:

1) Stay in your paid-off home. With SS, some additional income from savings, and no mortgage, you could get by on $3000 a month or so.

2) Downsize to a smaller home, or to a cheaper area. Now you have MORE cash from the leftover from the sale, and still no mortgage.

3) Don’t buy a new home at all. Equity of $600,000 will throw of $4000 a month with an immediate annuity (woman, age 70) that will cover rent in a luxury apartment. You still have SS in addition, plus the withdrawal amount from your investment portfolio.

LOTS of options with a paid-off house!

 

[Harpy Eagle]

And most people do.

Some, not sure most. Sounds like purgatory to me personally.

 

[1srelluc]

The average middle class person lost 33K of their wealth just last year.

@GOP: Average middle-class household lost over $33,000 in real wealth in just the past year

twitchy.com

 

[Harpy Eagle]

The percentage of people who "self fund" their retirement is about 10%.
I am assuming you are talking about self employed?
And even then, only 3.5% of Americans will receive no SS.

Was thinking more of those that do not have any sort of pension.

Take my military pension for example, while it is not very big, if I lived to be 85 it is like having an extra 576000 saved and if I live to be 90 it is like having an extra 720000 saved, just from the time I plan to retire.

But yes, most everyone gets SS, not that one could live very well on just that.

 

[Meister]

No, you can take the equity you build up in one location and apply it to your new location. Better yet if you plan to retire in a lower-cost area.

I‘m right outside DC, where a townhouse is easily $700,000 - $800,000. I could retire to Florida in a seaside condo for half that - and pocket the rest. Then let’s say after 5 years, I’m bored with Florida and want to go to North Carolina. I simply take the cash from the Florida sale and use it for my new NC place.

The key is to be mortgage-free by retirement.

Thing is that if you sell your condo, and buy at half that in Fl. The other half is not going to be sheltered from taxes.
You need to figure that one out and get some good advice.

 

[Harpy Eagle]

No, you can take the equity you build up in one location and apply it to your new location. Better yet if you plan to retire in a lower-cost area.

I‘m right outside DC, where a townhouse is easily $700,000 - $800,000. I could retire to Florida in a seaside condo for half that - and pocket the rest. Then let’s say after 5 years, I’m bored with Florida and want to go to North Carolina. I simply take the cash from the Florida sale and use it for my new NC place.

The key is to be mortgage-free by retirement.

We will be mortgage free as we will sell the house we are in, but we will rent for the rest of our time on this planet after that. My dream retirement involves moving every few years until I am not physically capable of doing do any longer

 

[pknopp]

We didn't have that when we retired BUT the one thing both me and my wife have which fewer and fewer are going to have is a pension. As long as you continue to have a monthly income you need less saved.

 

[JackOfNoTrades]

I see this kind of thing a lot in my Youtube feed, because I watch financial stuff.. so these things show up a lot.
And it is almost always sponsored by Fidelity or another retirement custodian company.
Because they want as much of your money as you can possibly give them.
If people needed $1 million to retire - screw that - if people needed $500,000 to retire - NO ONE WOULD BE RETIRED.
The average net worth of people in America at age 64, removing the lowest 5% and the top 5% - is only about $200,000. And that includes the value of their home.. which for far too many people - that IS all the value they have.
So if you needed that much money - they would all still be working.

Even more absurd is companies like Fidelity tell 30 year olds - who are just starting out with children etc. - that they should have at least $50,000 in retirement savings. By 35 years old - $200,000. GTFO. No one is going to be able to do that.

My rant for the day

If you want to totally retire, you're gonna need a lot more than that.

 

[Concerned American]

This is true. The goal should be to have your home paid off (or close to paid off) by the time you retire. If you have no mortgage payment, an individual should be able to get by with the basics on $3000 a month or so. Two-thirds of that could come from social security, and the remaining third could come from a 4% SWR on a balanced portfolio of $300,000.

If you want to include some luxuries - travel, restaurants, etc. - then you’d need a little more.

I believe that people should have their homes paid off by 50 at the latest. Earlier if you have kids. We paid ours off after 18 years--just in time to redirect those payments to tuition for the kid. Four years later, we started bank rolling those $$, allowing us to retire with a nice nest egg early. The bottom line is young folks need to exercise fiscal discipline. Put a little away every paycheck (pay yourself first), small at first and add to it as you age. We stumbled into the thought. Purchased an item on credit when we were young and when it was paid off--we just threw that money into the bank. We operated that way through our working years. Now we don't buy anything on credit. In today's market, depending on what you buy, it saves you between 8 and 25% in interest payments conservatively.

 

[Lisa558]

Thing is that if you sell your condo, and buy at half that in Fl. The other half is not going to be sheltered from taxes.
You need to figure that one out and get some good advice.

You mean property tax? The paid-off primary house isn’t sheltered from taxes either.

 

[Meister]

The primary house (condo) isn't sheltered. I think there are ways to protect it....but, not sure.

 

[Lisa558]

I believe that people should have their homes paid off by 50 at the latest. Earlier if you have kids. We paid ours off after 18 years--just in time to redirect those payments to tuition for the kid. Four years later, we started bank rolling those $$, allowing us to retire with a nice nest egg early. The bottom line is young folks need to exercise fiscal discipline. Put a little away every paycheck (pay yourself first), small at first and add to it as you age. We stumbled into the thought. Purchased an item on credit when we were young and when it was paid off--we just threw that money into the bank. We operated that way through our working years. Now we don't buy anything on credit. In today's market, depending on what you buy, it saves you between 8 and 25% in interest payments conservatively.

Well, 50 would be great, but people should definitely have the mortgage paid off by retirement.

I do agree that young people - or middle age people, too - need to exercise fiscal discipline. I hear excuses as to why they can’t save after they’ve paid all their bills. Well, then they’re living too high. For example, I knew someone in her 50s with virtually no savings, but she was renting a 2-bedroom because she said a 1-bedroom was too cramped. The responsible thing would have been to go with the 1-bedroom and put the difference toward a retirement fund.