Every retiree needs a magic number, which is simply the amount of money you need saved to see you through retirement. Contact our team of retirement planners in Wausau WI to learn more.
A Kiplinger article, The Magic Number Needed to Retire Comfortably is More Than You Think has some excellent insight.
Average American Doesn’t Have Enough
The article references a 2024 Planning & Progress Study that found most respondents believe they need nearly 1.5 million dollars in the bank to comfortably retire.
The study also found the average amount U.S. adults have saved for retirement is a mere 88,400 dollars, which is actually less than 2023’s 89,300 dollars. It seems that for some Americans, saving for retirement is getting harder, not easier.
Consider that about 11,000 Americans will turn 65 every day through 2027, only half of Baby Boomers and members of Generation X think they’ll be financially prepared when they reach their preferred retirement age.
Many Expect To Outlive Their Money
The article provides more eye-opening data about how both Baby Boomers and Gen Xers are faring in terms of preparing for retirement. Presently, just less than half of both Boomers and Gen Xers think they’ll be fully financially prepared for retirement.
While anxiety about whether you’ll be ready for retirement is normal, the fact that nearly half the members of both those generations think they’re currently underprepared, is alarming to me.
That data also reveals that 42 percent of Gen Xers and 37 percent of Boomers think, as currently situated, they’ll likely outlive their money during retirement. Also, Gen Xers, as well as Millennials, report they expect to need about 1.6 million dollars in the bank to comfortably retire. And high-networth people, who are those with more than one million in investable assets, think they’ll need almost four million dollars saved to secure they’re ideal retirement.
Generation Z Is Ahead Of The Curve
Here’s where the data really gets interesting. On average, American adults say that they began saving for retirement around age 31. But those in Generation Z typically began saving for retirement at about age 22, or a full decade earlier than previous generations. They report they began earlier to make securing their own ideal retirement more likely.
Interestingly, age 22 is 15 years earlier than the average Baby Boomer began saving for retirement.
The article quotes a financial expert from Northwestern Mutual who notes that recent bouts of inflation pushed people to focus more on their nest eggs. Because of inflation, many people saw their financial magical number go up.
Meet With Your Financial Services Professional
Step one is a sit down with your financial services professional. As you alluded to a few moments ago, there’s no universal magic retirement number.
Perhaps, during your meeting with your financial services professional, your magic number will be much lower than you expect because your home is paid off and your goals for retirement are modest.
But if your meetings reveals that your magic number is higher than you expected, or if you knew your number but are running behind on reaching it, there are options.
Potential Options
Maybe you aren’t fully maxing out your 401(k) or an IRA. Perhaps a conversation about an annuity is warranted — though those aren’t a good fit for everyone. It’s also possible that a more aggressive asset allocation could help you energize your savings a bit.
Long story short, you have options. Don’t panic. Adjust your strategy with the help of your financial service professional and then maintain the discipline to stick to that strategy.