How much money do you need, to retire? Well, that’s the million-dollar question, isn’t it? The answer is different for everyone, but Merrill Lynch recently attempted to solve this puzzle, by identifying an amount of money that the average American should aim to save for retirement.
Their answer: $738,400
Of course, it’s important to remember (and Merrill Lynch themselves stressed this) that this number is only an average, ballpark figure assigned to the “typical” person’s need for retirement income. You situation could be drastically different. But let’s take a look at how they arrived at that figure.
If you assume a 4 percent rate of return on investment (not guaranteed by any means, but a common “guesstimate” used in the financial industry), then you could withdraw $30,000 from this retirement account in the first year of retirement, and continue to adjust withdrawals accounting for inflation each year thereafter.
Then, you would add the amount you expect to receive from Social Security. Currently, the average annual benefit is about $17,000… So this would leave you with a yearly retirement budget of about $47,000.
Would that work for you? Again, these numbers are just averages. You might expect to receive more or less from Social Security, you might have other sources of income aside from your savings, and you might feel that you need more or less annual income than these amounts. The point of Merrill Lynch’s analysis is not to tell each of us that we must save precisely $738,400 before we retire. The point was to demonstrate the outcome of a very “average” scenario, to get you thinking about your own retirement income needs.
We can help you identify your own retirement savings goal, so that you have a better idea of how much money you should be saving every year. The one thing we do know for certain: Most Americans are not saving enough. So make an appointment with us, and we can help you set a savings goal and then identify different strategies to help you work toward it.