How Much Should You Have to Retire?

My inbox gets pounded like new shingles after a windstorm on a daily basis. Mutual fund companies, firms selling technology “solutions” to problems I didn’t know I had, financial advice columns, etc. Recently, on successive days, I received emails with the following headlines from two different publications:

1. Investors Say They Need At Least $3 Million To Retire Comfortably;
2. $2 Million in Investable Assets Leads to Retirement Confidence. If I had a million dollars for every article with ridiculous, misleading headlines like these, I might retire. (Nah, I like what I do)

I could easily spend a couple of paragraphs de-bunking what these two articles are selling, but that’s not really the point. The point is that magic number is completely different for each of us. Here is a basic, more pertinent checklist:

• What are your expenses now and what will they be through retirement?
  • Do you have any outstanding debt? That can be okay, by the way, as long as your income is sufficient to pay it and the interest rate is reasonable;
  • Do you have any medical issues that will require extra care, and expense?
• How long do you plan to live? (Mainly kidding, although that would make the planning process much easier) We have clients that believe they will live well into their 90s because their parents did – that should be taken into consideration;
• Where will your income come from in retirement?
  • Do you or your spouse have a pension? Most of us don’t these days;
  • Social Security benefits will provide some income but not nearly enough for most of us;
  • How much have you saved in your workplace retirement accounts and other investment accounts such as IRAs and Roth IRAs?
  • Do you expect to inherit assets that can be used for income?
• Do you have a desire to leave a legacy to your children or charity?

The financial planning process takes all this into consideration to help determine the likelihood that one’s assets will outlive them – the desired outcome. (As much as it’s tempting to picture ourselves skidding into the grave on two wheels after spending all but our last dollar, that’s cutting it too close for our comfort) In the end, however, the ultimate decision of when to retire is up to YOU.

A man named Clarence Hughes went to the dentist in 1931 with intense pain. After being anesthetized, Clarence woke up hours later with 16 fewer teeth and no tonsils. He died about a week later. His wife sued that Clarence never consented to the procedures. Interestingly, the court found that medical professionals were required to make the best decisions for their patients.

In the 70+ years since Clarence’s, ahem, unfortunate experience, the medical profession has evolved to helping patients make informed decisions about their own care, together. Similarly, a good financial professional and a good financial planning process helps clients make informed financial decisions, specific to their needs, without the distraction of alarming headlines.

Steve Byars, CFP®