Can you retire with less than $1M?

By: Steven L. Schou, CFP®, AWMA®, Vice President Business Development & Wealth Advisor

You may have read that you need at least $1 million to retire comfortably. What if you don’t have that? What you need to accumulate or how your use what you have accumulated will be based on a realistic assessment of your lifestyle and what you want your retirement to look like. Are you still saving a good percentage of your current income in your retirement plan through your employer? Are you investing prudently based on your retirement goals? Are you working to your full Social Security retirement age or retiring sooner?

Your Social Security income could have a huge impact on the additional income that you need to create based on your pre-retirement income. If there is a shortfall, are you willing to work part-time in your early retirement years? All of these factors and many more will have an impact on the type of retirement you are building, but life happens, and most people simply adjust to their circumstances.

What If: You plan on retiring in three years at age 67. You are currently earning $60,000/year and are projected to accumulate about $400,000 between you and your spouse. In addition, your Social Security income is projected to be about $2,000/month and your spouse’s is projected at about $1,000 month. You also need to consider if there are any major health issues or financial obligations that could affect your retirement. Little or no debt will make a big difference in the amount of income that you will need to maintain your lifestyle.

Now: Let’s create your potential retirement picture. You would like create $5,000/month before taxes in retirement. With the projected $3,000/month combined Social Security you are short about $2,000/month. Withdrawing about 5% a year from your accumulated $400,000 would be about $1,600/month. This would leave you short $400/month. Based on this example, you may simply adjust your expenses by the shortage or one of you may decide to get part-time work to compensate for the shortage. Either way would work, but the choice is up to you.

As you can see in this example, the amount of money you will need to retire is based more on your lifestyle than what someone arbitrarily suggests everyone needs to retire. All hope is not lost if you have accumulated less than $1M. Also note that your retirement may not be automatic if you have accumulated more than $1M. It still goes back to lifestyle and the retirement you want to create. The common denominator for everyone is to seek guidance of a knowledgeable Certified Financial Planner® to help you get the most out of retirement. Take time to plan because there are no do-overs in retirement.


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