The $1 million mark has long served as the ultimate retirement account target for many aspiring retirees. Those who manage to stash away seven figures earn millionaire status in addition to feeling as though they will be able to support themselves comfortably throughout their golden years. However, times change, and $1 million no longer stretches as far as it did in the 1980s and '90s.
Several factors determine how long your savings will last after you retire. Some are fairly straightforward, while others are less obvious and more difficult to predict. Here are some of the basic questions you should ask yourself when determining your proper retirement savings target.
How much will you need to withdraw every year to support yourself after you retire?
Are you a lavish spender, or a thrifty bargain hunter?
Will you have adequate funds for discretionary expenses like vacations?
Does your health require significant expenditures?
(keep in mind that healthcare costs may increase as you age)
How old will you be when you retire?
How long do you believe you will live?
What are your expectations for your tax rate throughout your retirement years?
The more you pay in taxes the less money you will have for retirement.
Do you have a retirement plan that offers tax benefits?
Having 1 million in a Roth is ideal Why? There are no taxes on distributions.
Do you have a financial cushion to cover potentially expensive unexpected events?
How will your portfolio returns fare once you retire?
How much will the purchasing power of your dollars erode over time? Even modest inflation can shrink the value of your savings.
Is it still possible to retire on $1 million? The answer to that question depends on a number of individual factors that can change over time. We'll help you understand how the purchasing power of your retirement savings can change over time, giving you the information you need to come up with your own magic number. Contact your advisor and talk through theses factors and more to get a rational perspective on how to make the retirement you want work for you and your financial plan.