How Much Is Enough to Retire On?

Experts often advise that people save-up ten times their annual income before retiring.  The Age-Friendly Institute tapped its panel of older adults to examine a gap in people’s thinking and habits versus that rule of thumb in the retirement industry. 

The survey of age 50+ adults not-yet-retired or semi-retired asked “how much in savings do you think is required for a comfortable retirement?” and “how much have you saved?”.  For both questions, the median response was four times their annual income at the time of retirement.  

When responding about how much they’d saved or would need, respondents were asked to exclude the equity in their primary home. Very few, just 15%, have saved the recommended ten times their income, and they say that’s ok. Respondents signaled that their saving habits match their own thinking on what they’ll need.  Three out of 4 respondents believe they’ve saved what they’ll need.  

Determining the right amount of savings varies widely.  When asking people their feelings about retirement, they reveal the hardest question in the planning process is ‘how much money is going to be enough’.  Lifestyle choices such as travel play a big role.  So do things one can’t plan for, such as an unexpected decline in health [see related article].

You’ll need to be in the right ballpark given your area’s cost of living, says Tim Driver, President of the Age-Friendly Institute. But needs are shifting.  There are more variables in determing the amount given people’s newfound longevity and their ability to perform 'retirement jobs' not as physically taxing.  People are redefining retirement built around flexibility and how they wish to spend their time.  They’re working longer, typically in a new capacity.

One 60-year old, Oregon-based respondent said “Later in life, unrequited dreams and regrets resurface about not at least trying to do what one loves. Often it would be great to work part time at an old job, while retooling to follow a new, more creative path.”
Because there are now more retirement options available, consulting a financial advisor may be more important.  Advisors themselves have gotten more creative.  They are increasingly accustomed to walking through with clients the expanded number of inputs—both quantitative and qualitative.  The goal is making a good decision, and then staying the course as plans and situations evolve.