Experts Agree: Have at Least This Amount Saved Up or — Never Retire

Most Americans are woefully unprepared for retirement.

A 2019 report by Northwestern Mutual showed that 22% of Americans had less than $5,000 in a retirement fund.

The study also found that more than 56% of Americans have no idea how much money they needed to fund their own retirement.

Another 45% ominously predicted that they would probably outlive any retirement savings they accumulated.

Retirement is basically a living expense fund that must be strategically allocated to last throughout retirement.

The general expert wisdom used to be that $1 million dollars was the minimum amount required to fund a retirement.

A $1 million dollar retirement fund will probably last 19 years if daily living expenses are carefully and strategically calculated, according to a study by GOBankingRates.

However, such an amount probably isn’t realistically enough to sustain a retirement in the 21st century.

A 66-year-old retiree today must spend over $40,000 on annual cost of living expenses in most cities.

So, a million dollars could conceivably last 12 to 25 years, depending on residency and the local cost of living standards.

However, various factors must be taken into account. For example, the inflation rate was 1.8% in 2019. It was 3.8% in 2008 and 5.4% in 1990.

Since no one can predict future inflation rates, there is no way to assume that a $1 million retirement budget in 2020 will be viable in 2030 or 2040.

Or, that a $1 million retirement is going to last 20 or 25 years.

The $3 million retirement

Financial advisor Thomas Balcom told MarketWatch that the $1 million retirement nest egg is an outdated concept.

Saving at least $3 million is more realistic, according to Balcom.

The $40,000 annual living expense estimate must be doubled to $80,000 or tripled to $120,000 to realistically accommodate current cost of living expenses, Balcom says.

Other experts even believe that a minimum amount for a comfortable retirement should be $4 million or $5 million.

Balcom’s $3 million retirement estimate, while startling, may not be unrealistic.

According to a Spectrum Group survey referenced in the MarketWatch story, only about 3% of Americans are even worth $1 million.

Consider that the average retired couple must bear out-of-pocket costs for medical expenses and will pay more than $388,000 for their medical expenses throughout retirement.