In past generations, having a million dollars meant a lifetime of luxury.
For the past several decades, it was the standard threshold guaranteeing a comfortable retirement.
But today? It’s only a fraction of the money you’ll need to save up in order to retire.
A cool $1 million has long been considered the gold standard of retirement savings. These days, it’s only a fraction of what you will really need.
For instance, a 67-year-old baby boomer retiring now with $1 million in the bank will generate $40,000 a year to live on adjusted for inflation and assuming a sustainable withdrawal rate of 4 percent, said Mark Avallone, president of Potomac Wealth Advisors and author of “Countdown to Financial Freedom.”
It’s worse for a 42-year-old Gen Xer, whose $1 million at retirement will only generate an inflation-adjusted $19,000 a year when all is said and done. And a 32-year-old millennial planning to retire at 67 with $1 million would live below the poverty line.
That’s what Avallone, a certified financial planner, calls “million-dollar poverty.”
For most Americans, there’s been a serious lack of proper investment income and planning, Avallone said. That, coupled with inflation, a looming pension crisis and longer life expectancy, is “a toxic formula for successful retirement,” he said — one that will result in a dramatic drop-off in lifestyle for retirees.
“Today’s generation of working people grew up in an era where their parents went to a mailbox, and a check appeared. But pensions are almost extinct,” Avallone said. “People have to self-fund their retirement, and the enormity of that challenge is underestimated.”
WalletHub conducted a study this year to determine how long a nest egg of $1 million would really last. The personal finance site compared average expenses for people age 65 and older, including groceries, housing, utilities, transportation and health care.
Naturally, depending on where in the U.S. you live, the longevity of a $1 million nest egg varies. Those dollars stretched furthest in states like Mississippi, Arkansas and Tennessee, where retirees could live a life of leisure for at least a quarter of a century.
However, in Hawaii, where residents pay roughly 30 percent more for household items across the board, that same amount will only get you just shy of a dozen years — largely because of that higher cost of living and pricey real estate.
Considering that many families spend more than 100 percent of their income after taxes on monthly expenses alone, there are only two ways to overcome million-dollar poverty, Avallone said: Earn more or spend less.
Here are the states where a $1mil retirement will go the least/farthest:
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has become a frown
I think the scarier prospect is that the digits don't matter
in a real world falling apart
but look at that bitcoin go
"only two ways to overcome…earn more or spend less"
reminds me of that Steve Martin joke: "How to make a Million Dollars and not pay taxes…First, get a million dollars OK, then when the tax man comes….
The good news is the planet may not be livable long enough for most people alive to reach retirement age, making the concern of the article a moot point.
The Lacking and Poor Pension
A Depressing Poem by Someone Who-Wishes-to-Remain Anonymous
Whose pension is that? I think I know.
Its owner is quite sad though.
It really is a tale of woe,
I watch him frown. I cry hello.
He gives his pension a shake,
And sobs until the tears make.
The only other sound's the break,
Of distant waves and birds awake.
The pension is lacking, poor and deep,
But he has promises to keep,
Until then he shall not sleep.
He lies in bed with ducts that weep.
He rises from his bitter bed,
With thoughts of sadness in his head,
He idolises being dead.
Facing the day with never ending dread.
How do you like the nom de plume? Technically, it's three words so it's fashionable, I guess.
(from letter-generator.org.uk, because I'm no poet, but couldn't resist the topic)
Simple math. The median household income in the US $59,039. Most people read that number and think it represents individual income, but really that number needs to be divided by 2.1 which is the average number of people in a US household.
$59,039 / 2.1 = $28,114
I believe the vast majority of Americans would be more than happy at the thought of a $40,000 income, plus social security for retirement. That income is a heck of a lot more than they make actually working for a living!
Between our two city pensions me and the Mrs. have the equivalent of $1.1 million in our retirement account, but not only does it not seem likely to be enough it is also insecure. We get no cost of living adjustments so no matter what happens to inflation (real or fake), our monthly checks will never go up. We can't withdraw it early and we have no control over how it's invested. So for the sake of planning, I picked a number out of thin air: we expect to lose 50% of it before we die which could happen in any one of several ways:
1. Inflation is so high that our purchasing power is reduced 50% (remember: no COLA).
2. The City goes bankrupt (or it's vaporized in WWIII) and our checks just stop coming halfway through our estimated 20 year retirement.
3. The City goes bankrupt and our checks are cut 50% based on a court settlement.
Our plan is that gold and silver will rise enough and at the right time to roughly compensate for our 50% loss. Pretty shaky, but that's what we've got. I noticed that city retirees in little Central Falls, Rhode Island had their monthly checks cut by 50% a few years ago, but gold and silver haven't done their moon shot yet, so that's just one of many ways our shaky plan could fail.
"Welcome to the Hunger Games. And may the odds be ever in your favor."
Im in my early 40's and Im out of the workforce with 1 million plus a small farm, debt free. The farm provides alot of our food, heating fuel, and about 8-10k per year in farm profit after expenses. The million is invested in about 1/3 income property, 1/3 corporate bonds, 1/3 "other". Brings in about 40k a year in passive income. The wife works off the farm part time…makes about 7k. Add it all up we're in the mid-to-high 50's, consider no mortgage, very little food bills, no heating bills and its considerably better than most families working 2 full time jobs….oh and we dont have cellphones or car payments.
So, depending on how you do it, a million can be enough IMO.