It wasn’t long ago when most people believed retiring with a million dollars was enough to live comfortably through the entirety of their golden years. A million dollars is certainly a lot of money. However, times have changed and inflation may be partly to blame. Inflation can cause money to be worth less, products may cost more and there is no guarantee wages will rise in unison.
Furthermore, those who plan on retiring in the near future or even within the next decade or sooner are not guaranteed to receive a raise in spite of inflation. It is only fair, and perhaps wise, to ask: Is a million dollars enough for retirement?
A Million Dollars Isn’t What It Used to Be
If you are considering retiring or simply want to get an idea of how much money it will take to retire, a CERTIFIED FINANCIAL PLANNER™ Professional can help!
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Fee-only, retainer-based CERTIFIED FINANCIAL PLANNER™ Professionals don’t have a conflict of interest, meaning they won’t receive financial compensation for steering you toward certain investments and services. Find a CERTIFIED FINANCIAL PLANNER™ Professional you are comfortable with while giving preference to those who customize their services to your unique needs.
Considering the Nuances of Your Unique Life Position and Retirement Goals
The answer to the question of whether a million dollars is enough money for your retirement depends on your specific situation and your desired quality of living during retirement. If you are considering retiring in your 50s or early 60s, a million dollars might not be enough money for retirement, especially if you have dependents, health problems, or debt obligations. However, if you are in your 60s or don’t plan on retiring until you reach your mid-to-late 60s or 70+, a million dollars just might prove sufficient for retirement.
Sit down with your fee-only CERTIFIED FINANCIAL PLANNER™ Professional, explain what you have in mind for your retirement including the age at which you would like to retire and you will get a better sense of whether $1million dollars will be enough. In particular, your desired quality of life during your golden years will largely dictate whether a million dollars will prove sufficient. If you plan on traveling, golfing, scuba diving, and living life to the fullest for several decades, you may need much more than a million dollars unless you wait until your late 60s or early 70s to retire.
Alternatively, saving a million dollars for retirement has the potential to be more than enough if you are willing to live frugally. Meet with your CERTIFIED FINANCIAL PLANNER™ Professional, go over the potential costs of retirement, have this professional run the numbers and you will find out exactly how long your savings will last.
At Financial Freedom Fee-Only Wealth Management, we refuse to provide one-size-fits-all cookie-cutter solutions. We know our clients and potential clients are individuals with distinct desires, goals, and plans. We offer personalized retirement planning tailored to your current life situation, retirement aims, and the other nuances of your idiosyncratic financial picture. We will perform a detailed break down of your current investments, shape your overarching strategy, possibly diversify your holdings and ultimately help you reach your retirement goal on time or earlier than expected.
Will Your Investment Earnings Outpace Inflation?
Let’s assume inflation will be around 2% to 3% for the foreseeable future. If your investments earn 4% to 5% per year, the money you have in the market may outpace inflation. However, there is no guarantee you will achieve this return. In fact, if the majority of your money is tied up in high-risk stocks, there is a reasonable chance you may lose money during some financial quarters and years. An experienced fee-only CERTIFIED FINANCIAL PLANNER™ Professional will customize your investment portfolio with the optimal diversification and risk level for a balanced approach.
The overarching goal is for your money to continue working on your behalf and significantly outpace inflation so you can maintain your quality of life through your golden years while enjoying ongoing passive income. A financial advisor can help you to implement the right strategy with your unique retirement timeline in mind.
You Can’t Predict the Future
Aside from inflation and the inherent risk of investing in equities, there are also the variables of the cost of housing, healthcare and everyday necessities such as food. If the cost of housing continues to soar and healthcare remains egregiously expensive, having a million dollars may not keep pace with these expenses.
There is also the variable of your lifespan. There is no way to predict how long you will live. Your financial advisor can help you put together a plan that takes into consideration your longevity, and projections for future expenses.
At Financial Freedom Fee-Only Wealth Management, we have over 55 years of experience working with individuals, couples, and families. We are a fee-only, fiduciary, wealth management firm dedicated to helping our clients protect, grow, and maximize their wealth.
Contact us today for a complimentary consultation, and find out if we are the right fit for your needs.