Successfully saving for retirement doesn’t mean having $1 million in the bank. Experts say you need to plan for your retirement to last several decades and base your budget around living to be 100 years old.
According to the Schroders 2023 U.S. Retirement Survey, working Americans think they need $1.1 million to retire, but MarketWatch said it’s not as simple as having a standard amount for every single person. Not everyone will live the average life expectancy, which is about 77 years in the U.S., per the Bureau of Labor Statistics.
“You don’t want to plan for the average life expectancy. You want to plan conservatively and plan for expenses through age 100,” Matt Fleming, wealth adviser executive with Vanguard, explained to MarketWatch.
Vanguard estimated people should look to have 75% to 85% of their income for retirement years, Fleming said. Look at potential sources of income — 401(k), IRAs, pensions, savings and Social Security — and additional income streams like rental properties, annuities or inheritance. It’s also important to check insurance policies, MarketWatch reported.
A study from the TIAA Institute and George Washington University found that respondents with strong longevity knowledge were more likely to save more for retirement. They also find it easier to make ends meet in retirement and were more likely to try estimating how much they need to save.
Using the original 4% benchmark, MarketWatch stated that $1 million in savings and investments would allow you to spend $40,000 (adjusted for inflation) each year in retirement with little chance of outliving your money.
