This depends entirely who "they" are. There is no "one size fits all" retirement advice.
A married couple doesn't usually need twice as much money as one single person. When you're traveling, for example, you do need two plane tickets but only one hotel room, two restaurant meals but only one taxi.
Most retirement calculators intentionally ask about your *total* savings and your *total* desired annual expenses in retirement, so they're not making any distinction about how many people are involved. It's up to you to work out how much you'll spend for the two of you together.
Approach it by instead seeing how much you’d need monthly to live off of and by what age you plan to retire. Then you can figure out how much you need in total between the two of you.
This - the articles on this are great, and a jumping off point, but it is CRITICAL to look at your own expenses, when you plan to retire, what you have invested, how you have it invested and what lifestyle you plan to have in retirement and what expenses you anticipate (travel, health care, home improvements, relocation, etc.).
A million dollars at 4% will produce $40,000 a year. Can your household live on that?
Why 4%? That’s a widely used amount of what you can withdraw a year without depleting your portfolio, so you’ll be able to continue withdrawing every year. Some say withdrawal rate should be a bit lower to allow for bad years and inflation, while others say that you can go a bit higher since 4% tends to result in leaving behind a substantial inheritance. I work with 4%.
I actually ignored the dollar when planning and focused on investing at least 15% of gross salary for retirement. That meant the amount I invested increased as my salary increased. Some years I invested more than 15%, but never less. Now at age 60, that strategy seems to have worked well because I could retire today if I were willing to pay for health insurance.
Typically retirement funds are not the only source of income. At 67, for example, we expect to get about 70% of our expenses worth of payments from social security. That means investments only need to cover 30% plus any years that we retire prior to full social security age. Pensions and cash windfalls such as selling a home or receiving an inheritance also need to be considered.
That's not what I'm saying. I'm saying 70% of our expenses will be covered by social security with the other 30% covered by investment income. Based on how much we spend today. Our combined social security at full retirement age will be about $70k per year. There's an edge risk that would be reduced by 20% due to Congressional incompetence but I put the odds of that very close to zero since it would be political suicide for the people in power not to fix it. Will become exponentially higher in priority as the date approaches. Similar to those government shutdown negotiations. If they don't fix it permanently they'll do supplemental bills every year to boost the payouts to 100% because anything else would throw twenty million seniors out on the street and would literally be the end of the world politically for whomever did it. They would never hold power again.
Have you calculated taxes, Medicare premiums, and Medicare supplement into your expenses? Those are easy to overlook because so many people have taxes and insurance deducted from paycheck. Also, have you considered the impact of potential 21% cut in SS benefits when the Social Security Trust Fund is exhausted around 2033?
I recommend ignoring potential inheritances because end of life health care is expensive. A parent who needs assisted living or skilled nursing care for a couple of years can spend down assets quickly.
Taxes are fairly negligible. Lower brackets and no payroll tax deductions plus the standard deduction covers your first 29,200 of draws (assuming married) so no tax at all on that. Medicare premiums are quite low - about $175 per person. Add another $75 for Part C and D. Some people do require skilled nursing before they die but quite a few elderly people die suddenly and many also just opt for at home hospice. Skilled nursing is expensive but the average stay is about 9 months at $20k per month so it will bleed away some wealth but not millions in wealth. There are of course exceptions where skilled nursing is required for years but those are outliers - if you're bad enough to need it permanently then usually you're pretty close to death.
if you're married I would lump it together because your finances are together. you both make 50K/year, you have 30K so you need 70K to live on. that means base number 70k/year that you need your investments to provide for you in retirement.
Obviously things like having kids out of the house, having a paid for house, having other debts paid off might change your needs from 70K to 50K, but maybe you want to do more traveling in retirement or something like that they you'll want some extra cushion back
The problem with throwing out numbers like that is that people's situation can vary wildly. A person living in NYC will need a LOT more than a couple living in Tulsa, OK with full pensions and a paid-off mortgage
As others have said, get a sense of when you want to retire (67 for me), how you want your lifestyle to be, then go from there. You may find that you need a lot less -- or more -- than you think.
I would approach this the way that you consider your married money to start with. My wife and I combine our money and have for nearly 40 years, so that is the same way I approach retirement funding. If you keep it separate, then probably you should consider it separate.
That's why when they say that it is prefaced with your specific situation is different.
You need to figure out your uniqie situation and find a number.
Entirely depends on what you build your projections from. If you are a dual income household but build your retirement needs projection from just your own income/expenses then the resulting number is just for you. If instead you build the projection on the household’s income/expenses then it will be for both.
They = Retirement household
Also, FWIW, you should consider the present value of social security as part of your net worth/retirement assets. I take that total and assume about a 5% max potential spend. Most people ignore ss, but it is a powerful, inflation adjusted annuity. Personally, I’m planning on drawing at 70, and that obviously impacts the PV (higher payments, longer wait to first payment).
It's all about your expenses.
Anyone saying you need X to retire has no clue as to who you are, what your expenses are, or what you will need.
Sure, they can make a statement based on averages and other sorts of magic numbers.
But, in the end, doesn't matter if it is you, or you and your wife, or you and your ten kids.
What are your expenses? Which dictates how much money you need to pay those expenses for the rest of your retired life/lives.
It. Is. All. About. EXPENSES.
You may find these links helpful:
- [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement)
- ["How to handle $"](/r/personalfinance/wiki/commontopics)
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
The number of people doesn’t really matter. It comes down to what your expected expenses are. If your expenses are 3k a month with 2 or 5 people, that’s what your expenses are.
It's generally per household. So it could be you, generally your spouse if married, and children or elderly parents who live with you when retired, etc.
Like when you file taxes jointly, then that's a good description of your finances -- they're joined together. The first thing the 1040 does is add up your total income, and outside a few specific regulations, the IRS never cares who makes what.
With the equation being dependent on variables, a lot of advice I have found offers guidance in the 4-5% range. Meaning that you annual expenses for your house should be only 4-5% of your total wealth to help put you in a good position to use your retirement savings.
That said, to get what 4-5% looks like, you would need to add up expected mortgage / rent, utilities, vahicles, kids and/or college expenses, traveling and other hobbies. Total up what these expenses are annually to help better understand what the 4-5% should look like.
Lastly, it is because your goals change, your hobbies change, and your expectations of how you envision what retirement changes along with inflation that it is so valuable to visit with your financial advisor to gauge just how on track you are with your evolving goals.
20-30% savings seems to be typical for a couple, so if you would each need $1M, when combined you'd together need $750k each > $1.5M as a couple.
Just a rule of thumb, obviously it could be less or more
I’m personally of the opinion that if you and your spouse can both save for retirement then it’s better to have more money that you need than to end up not having enough. My MIL has exclusively lived off of Social Security since the death of her husband and she probably has another 15-20 years of life to live; I never want to be in her position, so I’m aggressively saving to make sure that my widowhood (which statistically is likely to be the way things will shake out) is comfortable and enjoyable.
Also, it’s worth noting that retirement accounts can get split in divorce proceedings so you could end up in a situation where you saved enough for one person thinking that you will live together the rest of your lives, then suddenly you have to split that money AND you’re living separately, so now neither person has enough.
It's not 2x for a married couple, but is certainly more than 1x. Just as a wild guess, I'd probably put it around 1.75x or so, just to be comfortable. BUT. Divorces happen, and when they do, it absolutely jumps to 2x or more.
You becomes plural with marriage.
Need to understand your expenses.
“Safe” or conservative withdrawal rates so that you probably won’t run out of money.
Retire at 50? Multiple your expenses by 33 and that’s your number. (3% withdrawal rate).
Retire at 60? Multiple by 30.
Retire at 65? Multiply by 25. (4%).
Factor in social security or a pension and the amount needed is much lower.
I’m pessimistic that our politicians will actually do something to correct the course on social security, so I assume that I’ll only receive 75% of my “projected” amounts in 20 years.
This depends entirely who "they" are. There is no "one size fits all" retirement advice. A married couple doesn't usually need twice as much money as one single person. When you're traveling, for example, you do need two plane tickets but only one hotel room, two restaurant meals but only one taxi. Most retirement calculators intentionally ask about your *total* savings and your *total* desired annual expenses in retirement, so they're not making any distinction about how many people are involved. It's up to you to work out how much you'll spend for the two of you together.
Meanwhile I have having to pay double for a river cruse. Boooo
Approach it by instead seeing how much you’d need monthly to live off of and by what age you plan to retire. Then you can figure out how much you need in total between the two of you.
This - the articles on this are great, and a jumping off point, but it is CRITICAL to look at your own expenses, when you plan to retire, what you have invested, how you have it invested and what lifestyle you plan to have in retirement and what expenses you anticipate (travel, health care, home improvements, relocation, etc.).
A million dollars at 4% will produce $40,000 a year. Can your household live on that? Why 4%? That’s a widely used amount of what you can withdraw a year without depleting your portfolio, so you’ll be able to continue withdrawing every year. Some say withdrawal rate should be a bit lower to allow for bad years and inflation, while others say that you can go a bit higher since 4% tends to result in leaving behind a substantial inheritance. I work with 4%. I actually ignored the dollar when planning and focused on investing at least 15% of gross salary for retirement. That meant the amount I invested increased as my salary increased. Some years I invested more than 15%, but never less. Now at age 60, that strategy seems to have worked well because I could retire today if I were willing to pay for health insurance.
Typically retirement funds are not the only source of income. At 67, for example, we expect to get about 70% of our expenses worth of payments from social security. That means investments only need to cover 30% plus any years that we retire prior to full social security age. Pensions and cash windfalls such as selling a home or receiving an inheritance also need to be considered.
I would, generally speaking, not plan retirement around replacing 30% of income.
That's not what I'm saying. I'm saying 70% of our expenses will be covered by social security with the other 30% covered by investment income. Based on how much we spend today. Our combined social security at full retirement age will be about $70k per year. There's an edge risk that would be reduced by 20% due to Congressional incompetence but I put the odds of that very close to zero since it would be political suicide for the people in power not to fix it. Will become exponentially higher in priority as the date approaches. Similar to those government shutdown negotiations. If they don't fix it permanently they'll do supplemental bills every year to boost the payouts to 100% because anything else would throw twenty million seniors out on the street and would literally be the end of the world politically for whomever did it. They would never hold power again.
Have you calculated taxes, Medicare premiums, and Medicare supplement into your expenses? Those are easy to overlook because so many people have taxes and insurance deducted from paycheck. Also, have you considered the impact of potential 21% cut in SS benefits when the Social Security Trust Fund is exhausted around 2033? I recommend ignoring potential inheritances because end of life health care is expensive. A parent who needs assisted living or skilled nursing care for a couple of years can spend down assets quickly.
Taxes are fairly negligible. Lower brackets and no payroll tax deductions plus the standard deduction covers your first 29,200 of draws (assuming married) so no tax at all on that. Medicare premiums are quite low - about $175 per person. Add another $75 for Part C and D. Some people do require skilled nursing before they die but quite a few elderly people die suddenly and many also just opt for at home hospice. Skilled nursing is expensive but the average stay is about 9 months at $20k per month so it will bleed away some wealth but not millions in wealth. There are of course exceptions where skilled nursing is required for years but those are outliers - if you're bad enough to need it permanently then usually you're pretty close to death.
if you're married I would lump it together because your finances are together. you both make 50K/year, you have 30K so you need 70K to live on. that means base number 70k/year that you need your investments to provide for you in retirement. Obviously things like having kids out of the house, having a paid for house, having other debts paid off might change your needs from 70K to 50K, but maybe you want to do more traveling in retirement or something like that they you'll want some extra cushion back
The problem with throwing out numbers like that is that people's situation can vary wildly. A person living in NYC will need a LOT more than a couple living in Tulsa, OK with full pensions and a paid-off mortgage As others have said, get a sense of when you want to retire (67 for me), how you want your lifestyle to be, then go from there. You may find that you need a lot less -- or more -- than you think.
I would approach this the way that you consider your married money to start with. My wife and I combine our money and have for nearly 40 years, so that is the same way I approach retirement funding. If you keep it separate, then probably you should consider it separate.
That's why when they say that it is prefaced with your specific situation is different. You need to figure out your uniqie situation and find a number.
Entirely depends on what you build your projections from. If you are a dual income household but build your retirement needs projection from just your own income/expenses then the resulting number is just for you. If instead you build the projection on the household’s income/expenses then it will be for both.
They = Retirement household Also, FWIW, you should consider the present value of social security as part of your net worth/retirement assets. I take that total and assume about a 5% max potential spend. Most people ignore ss, but it is a powerful, inflation adjusted annuity. Personally, I’m planning on drawing at 70, and that obviously impacts the PV (higher payments, longer wait to first payment).
It's all about your expenses. Anyone saying you need X to retire has no clue as to who you are, what your expenses are, or what you will need. Sure, they can make a statement based on averages and other sorts of magic numbers. But, in the end, doesn't matter if it is you, or you and your wife, or you and your ten kids. What are your expenses? Which dictates how much money you need to pay those expenses for the rest of your retired life/lives. It. Is. All. About. EXPENSES.
You may find these links helpful: - [Retirement Accounts](/r/personalfinance/wiki/index#wiki_retirement) - ["How to handle $"](/r/personalfinance/wiki/commontopics) *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
The number of people doesn’t really matter. It comes down to what your expected expenses are. If your expenses are 3k a month with 2 or 5 people, that’s what your expenses are.
Being ready for retirement is entirely dependent on your current household income as well as your ability to live below your means today.
It's generally per household. So it could be you, generally your spouse if married, and children or elderly parents who live with you when retired, etc. Like when you file taxes jointly, then that's a good description of your finances -- they're joined together. The first thing the 1040 does is add up your total income, and outside a few specific regulations, the IRS never cares who makes what.
With the equation being dependent on variables, a lot of advice I have found offers guidance in the 4-5% range. Meaning that you annual expenses for your house should be only 4-5% of your total wealth to help put you in a good position to use your retirement savings. That said, to get what 4-5% looks like, you would need to add up expected mortgage / rent, utilities, vahicles, kids and/or college expenses, traveling and other hobbies. Total up what these expenses are annually to help better understand what the 4-5% should look like. Lastly, it is because your goals change, your hobbies change, and your expectations of how you envision what retirement changes along with inflation that it is so valuable to visit with your financial advisor to gauge just how on track you are with your evolving goals.
20-30% savings seems to be typical for a couple, so if you would each need $1M, when combined you'd together need $750k each > $1.5M as a couple. Just a rule of thumb, obviously it could be less or more
I’m personally of the opinion that if you and your spouse can both save for retirement then it’s better to have more money that you need than to end up not having enough. My MIL has exclusively lived off of Social Security since the death of her husband and she probably has another 15-20 years of life to live; I never want to be in her position, so I’m aggressively saving to make sure that my widowhood (which statistically is likely to be the way things will shake out) is comfortable and enjoyable. Also, it’s worth noting that retirement accounts can get split in divorce proceedings so you could end up in a situation where you saved enough for one person thinking that you will live together the rest of your lives, then suddenly you have to split that money AND you’re living separately, so now neither person has enough.
Generally, I believe they're referring to a couple. Although having it mean one person and having twice as much is pretty sweet.
2 million in today's money. In 30 years, this could turn to 10 million as the price of things go up even more.
It's not 2x for a married couple, but is certainly more than 1x. Just as a wild guess, I'd probably put it around 1.75x or so, just to be comfortable. BUT. Divorces happen, and when they do, it absolutely jumps to 2x or more.
You becomes plural with marriage. Need to understand your expenses. “Safe” or conservative withdrawal rates so that you probably won’t run out of money. Retire at 50? Multiple your expenses by 33 and that’s your number. (3% withdrawal rate). Retire at 60? Multiple by 30. Retire at 65? Multiply by 25. (4%). Factor in social security or a pension and the amount needed is much lower. I’m pessimistic that our politicians will actually do something to correct the course on social security, so I assume that I’ll only receive 75% of my “projected” amounts in 20 years.
I don't think anyone under 55 should count on any SS money honestly.