For Mark Roberts’ Use: When you think about retirement planning, it’s normal to focus on saving a specific amount of money. Most of us need at least an approximate savings goal, so that we can deduce a few important details. This number tells us how much progress we’ve made, helps us understand how much we need to be saving each year, and gives us an idea of when we can retire.
But what is that number? First of all, do understand that it will be different for each individual. However, researchers from Merrill Lynch were interested to discover how much money the average American needs to save for retirement, so they launched a study.
The final answer was 738,400 dollars.
The researchers did stress that this number is only an average. But if you’re wondering how they arrived at this figure, it’s relatively simple. They assumed an average 4 percent rate of return on the funds (not guaranteed, but a commonly used and often accurate assumption). Then they decided that retirees could withdraw $30,000 in the first year of their retirements, continue to adjust withdrawals according to inflation, and remain afloat throughout retirement.
Then, they added $17,000 annually, to account for the average Social Security benefit. This strategy would generate an income of about $47,000 per year.
Does that sound feasible to you?
Again, these assumptions are based on averages, and do not account for other income you might enjoy, or expenses beyond the typical. You might feel that you need to save more or less than this “average” suggestion, based upon your circumstances. The point of this exercise was to demonstrate a typical scenario, so that you can have at least a basic starting point for thinking about your savings goal.
But don’t take Merrill Lynch’s word for it. Give us a call, and we’ll discuss your own financial situation in more detail, while helping you set a realistic savings goal for your own retirement.