Retirement - How much does one need - Truth and Lies

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2024 Jun 7, 1:35pm   1,136 views  57 comments

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If you want to retire in comfort, investment firms and news headlines tell us, you may need
$1 million in the bank.
Or maybe not. One prominent economist says you can retire for a lot less: $50,000 to
$100,000 in total savings. He points to the experiences of actual retirees as evidence.
“You Don’t Need to Be a Millionaire to Retire,” says the headline of a column penned by
Andrew Biggs, a senior fellow at the American Enterprise Institute think tank, and published
in April in The Wall Street Journal.
Most Americans retire with nowhere near $1 million in savings. The notion that we need that
much money to fund a secure retirement arises from opinion polls, personal finance columns
and two or three rules of thumb that suffuse the financial planning business.
Financial advisers tell you to save 10 times your annual salary for retirement, enough cash
that you can live on 4% of the balance for a year. In one widely reported survey, Americans
said they would need $1.46 million in the bank to retire comfortably.
Biggs disagrees. To prove his point, the economist looked at responses to the federal Survey
of Household Economics and Decisionmaking between 2019 and 2022.
The survey asked retirement-age Americans, 65 to 74, how well they were managing
A majority, roughly 85%, said they were just fine: They were living comfortably, or at least
“doing OK.”
Only 15% said they were struggling.
The finding matters, Biggs says, because most retirees have much less than $1 million in the
bank. In the federal survey, the typical senior who reported a satisfactory retirement had
$50,000 to $100,000 in savings.
“It’s impossible to find any evidence that seniors need even a fraction of $1.46 million in
savings to be financially secure,” Biggs wrote.
By his argument, retirees don’t need nearly so much savings as financial planners say they
The average couple that retired in 2022 reaped nearly $46,000 in annual Social Security
benefits, by Biggs’s calculations. While that sum is “hardly extravagant,” he wrote, “a typical
couple can expect an income more than twice the elderly poverty threshold before they touch
a penny of their own savings.”
Biggs says retirement planners overstate how much income retirees actually need, and how
much they will spend, essentially as a way to drum up business.
Reactions to Biggs’s column ranged from admiration to outrage. Some readers reposted the
piece on X with praise. One critic quipped, “You don’t need to be a millionaire to retire and do
Biggs is a noted conservative economist and something of a contrarian. Earlier this year, he
and a colleague sparked outrage with a paper that argued for eliminating the 401(k) plan.
His new assertion, that people don’t need a million dollars to retire in comfort, flies in the face
of common wisdom in the retirement planning industry.
“What about rising health care costs?” said Lili Vasileff, a certified financial planner in
Greenwich, Connecticut. “What about more older adult children living for free with older
parents? What about divorces in later life that halve all assets on the cusp of retirement?”
Perhaps the most provocative claim in Biggs’s analysis is that only a few retirees face
financial challenges.
Alicia Munnell, director of the Center for Retirement Research at Boston College (and a past
collaborator with Biggs), estimates that at least two-fifths of retirees are struggling financially.
In the 2022 edition of the federal Survey of Consumer Finances, when seniors were asked
how they would handle a financial emergency, only 58% said they could rely on savings. To
Munnell, that figure reflects the depth of financial insecurity among retirees.
Why, then, did only 15% of seniors in the other federal survey, cited by Biggs, say they were
Munnell thinks many retirees are reluctant to discuss their financial problems in surveys.
“When people are asked about their well-being, I think there’s a certain pride,” she said. “You
don’t want to say, ‘I really screwed up.’”
Though Munnell disagrees with Biggs on the financial well-being of American retirees, she
applauds his stance that you don’t need a million dollars to retire.
“I don’t think it helps to hold out unrealistic savings goals and to exaggerate how much
money people need to fund a comfortable retirement,” she said.
The million-dollar retirement is a frustrating quest, Munnell said, because most of us do not
retire as millionaires.
The typical senior with a retirement account has about $200,000 saved, according to data for
households in the 65-74 age range from the 2022 Survey of Consumer Finances.
But only about half of those households report having retirement accounts at all.
On this point, Biggs and his colleagues disagree. He contends that many seniors have other
kinds of savings, not to mention pensions. Munnell believes that Biggs is overconfident in the
security of American retirees.
“I don’t know people, really, who have retirement savings who don’t have a retirement
account,” she said.
Retirement experts often say people will need about 80% of their preretirement income to
fund their retirement years.
Social Security covers only about half of that, according to the Social Security Administration.
And so, for a comfortable retirement, we are urged to save.
One rule dictates that we should try to save 10 times our annual salary to supplement our
Social Security income. For a typical American household, that comes to nearly $750,000, or
10 times the median household income of $74,580.
And then there is the 4% rule: Plan to withdraw 4% of your retirement savings to cover your
annual living expenses, adjusting the figure for inflation each year.
Some experts say 4% is too low; others contend it’s too high. Either way, the message is
clear: If you are going to live on a single-digit percentage of your retirement savings, you will
need a lot of it.
Biggs believes those rules exist largely so that investment houses can sell investment
products, and so personal-finance websites can attract pageviews.
He points to the 80% rule: Not many retirees, he reasons, will ever spend that much of their
working income in retirement.
“For a long time, 70% was the recommended mean for middle-income retirees,” he said in an
email to USA TODAY, “and it’s crept up without (to my mind) particularly strong evidence.”
The 4% rule is a little harder to critique, he said, “but one thing we now know is that retirees
reduce their spending pretty significantly as they age.” Older retirees travel less, eat less and
spend less on children, Biggs said. Medical costs rise, but insurance covers most of them.
Retirement experts say the guidelines are meant as aspirational goals for working people to
plan their retirement.
“Those rules of thumb are helpful for folks in their early career, their mid-career,” said
Douglas Ornstein, a director with TIAA Wealth Management, part of the financial services
nonprofit. “By the time you’re five years out from retirement, those rules are probably not so
helpful anymore.”
No two retirements are alike, financial advisers say. Some retirees are still making mortgage
payments or supporting grandchildren. Others have neither dependents nor debt.
“If you’re living in Manhattan, yeah, you probably need a million dollars, if not more,” said
Christopher Lyman, a certified financial planner in Newtown, Pennsylvania. “If you’re living
out near Lancaster, Pennsylvania, with the Amish, there’s not a lot going on down there. If
you’ve got $50,000, you’re probably OK.”

Source: https://www.yahoo.com/finance/news/really-1m-retirement-savings-not-091427748.html

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1   clambo   2024 Jun 7, 1:52pm  

I'm retired.
I'm single, which is likely more expensive than being 1/2 of a couple.
If someone had a job with a pension, he doesn't need to save anything.
My older brother had no significant savings before he got an inheritance.
He worked at a hospital and has a pension, in addition to social security.
If you're not getting a pension, you should invest $500/month in a capital appreciation mutual fund; you'll have $1 million someday.
I have free time, and I tend to spend more now than when I was working.
I think if you don't have $1 million nor a pension, you will have a shitty retirement.
Get a Roth IRA, an HSA and if you have money left over, buy Vanguard Tax Managed Capital Appreciation Fund.
My problem is I was a bigmouth about my net worth and some females beg me for money sometimes.
2   Ceffer   2024 Jun 7, 2:49pm  

There are many unknowns in 'retirement'. Are you going to live a long time, or is your family genetics trending toward early death? That's a question that is pending but can't really be answered.

Do you want to 'retire early'? What about gap health insurance until Medicare kicks in at 65? That's expensivo, medical expenses can bankrupt.

A lot of men wind up dying just a few years into 'retirement'. One of my wife's friend's husband died (pre Covid) at 63 of a heart attack six month into formal retirement. They had just invested in a lavish home that they redecorated. She had to sell at a loss.

I have had clients die in their fifties and wind up organ donors.

There is also the conundrum of 'experts' who like to actuarial-ize you out to 95 to keep you working and saving so that your pile keeps paying investment commissions. They don't really give a shit if you keel over at 70, they just want to keep you at the earning rather than the spending wheel.

Deciding 'when' kinna depends on where you live and your projected expenses, whether you have a house fully paid for, whether you rent or not, whether you get positive reinforcement from your work or not, the general state of your health and what you can still do with it etc. Some people also want to buy their children's affections by leaving them shit. If you raise them and educate them, that should be sufficient.

Retirement is not a perfectly 'risk controlled' venture, it is taking a chance that you can enjoy your life without working or suffering immediate financial distress for as long as possible. I have also heard of wealthy professionals who overspent in retirement and re applied for licenses to go back to work in their eighties.

I also know one doofus who married a gold digger who spent his money like water and convinced him to sign over all his property to her because she convinced him that it would be safe from his predatory children. He did so, whereupon she kicked him out of his own house and her lawyer told him to get lost. He desperately was trying to get his licensure back and was living in a crappy little apartment in Richmond.

One of my employers in the day talked about his friend who worked like a dog to accumulate a nice fortune, keeled in his mid fifties to leave the pile to his wife. His wife got scammed by shisters and lost the whole thing.

So, I think retirement just comes when you are fed up and have 'enough' saved for a reasonable period of time and are ready to plunge into the risk factor. Whatever 'safety margin' is up to the individual. I know a few who scrape by in Santa Cruz in mobile homes on SS and public benefits and do OK. They get free appliances and a handy man paid by the Guv every year in the Great Socialist Paradise of California.

The recent uncertainties in the economy show there is no sure thing. What is flipping a few OldFucks from the KommieKunts is watching the dramatic loss of purchasing power in their various pensions and benefits to inflation taxation in the last couple of years.
3   Patrick   2024 Jun 7, 2:56pm  

gabbar says

And then there is the 4% rule: Plan to withdraw 4% of your retirement savings to cover your
annual living expenses, adjusting the figure for inflation each year.

I think this is about correct, but only if the money is in the stock market rather than "savings" which could mean a pile of paper cash which is being continuously stolen by the Federal Reserve.

So if you can live on $40K/year, you need about $1 million in the stock market to retire at that standard of living. Stocks themselves should mostly compensate for inflation.
4   clambo   2024 Jun 7, 3:24pm  

The 4% figure was recently raised a bit by the originator of the concept.

I believe he originally used a balanced portfolio in his study (e.g. Vanguard Wellington).

If you have enough money invested, you can get sufficient income from dividends, and never outlive your money.
5   AD   2024 Jun 7, 10:26pm  


Helping a family member to live in their $1 million dollar home in the mountains of Colorado, and with income about $30,000 per year. Property taxes and property insurance are reasonable.

The best offer they got on a reverse mortgage was CMT + 1.25% margin + 0.5% FHA mortgage insurance, and about $20,000 in closing costs.

They said they don't think they need to borrow more than $150,000 over the next 25 years.

CMT (constant maturity treasury) now is about 5.1%.

6   FuckTheMainstreamMedia   2024 Jun 8, 5:00am  

Entirely depends on

1.) Where you live.
2.) How much housing costs you.
3.) what you spend.

Can a couple live on $46k a year?

Yes. House paid off and low property tax go a long way towards making that happen. So does maintaining vehicles and minimizing that cost. Living somewhere with lots of no cost/low cost activities helps a bunch too. Also helps if your adult kids are not leeches.

Live in a big city with a high house or property tax payment? Spend like crazy? Continually bailing out the adult irresponsible kids? Live gets really expensive real fast.
7   clambo   2024 Jun 8, 7:03am  

The average social security payment is $1700/month per person.
Subtract Medicare premium, which varies according to your total income (not just taxable income).
Living on social security is poverty.
8   HeadSet   2024 Jun 9, 12:24pm  

clambo says

I was a bigmouth about my net worth

ALWAYS a mistake. That impresses no one except those that want to get your money.
9   Ceffer   2024 Jun 9, 2:37pm  

Yams and face on the barbie go a long ways to making retirement more enjoyable. You do have to dig quite a few spiked pits (punji traps) however, so some land with travelled paths around the survival compound helps.
10   EBGuy   2024 Jun 9, 4:26pm  

Last month I sold off some indexes in my retirement accounts and bought some BND (Vanguard bond fund). Bonds are currently about 1/5 of my retirement portfolio. What kind of bond mix are folks running in their retirement accounts? For reference I am around the same age as our fearless leader. Still scratching my head at the difference between the 30 day yield on BND (4.66%) and the actual distributions (which are around 3.66% looking at the June 3 distribution).
11   clambo   2024 Jun 9, 8:20pm  

I'm retired, on Medicare, and I'm about 90% stocks.
My allocation is probably a little bit extreme, but it's OK for the time being.
Stock funds do pay a dividend, although generally not large.
Some good funds are balanced with dividend paying stocks and bonds, which make them useful for income. An example is Vanguard Wellesley Income Fund

In a year of so I plan on changing my asset allocation in my IRA accounts to more income type investments.

My greed exceeds my fear, and my optimism exceeds my sense of impending doom from the socialists.

I probably will get some high yielding stock ETFs for a portion of my IRA, e.g. SPYI, JEPI, etc.
12   EBGuy   2024 Jun 10, 2:39am  

Looks like a 90/10 Portfolio does pretty well if you stick to rebalancing it once a year.

Putting 90/10 to the Test
One Spanish finance professor went to work to find the answer. In a published research paper, Javier Estrada of IESE Business School took a hypothetical $1,000 investment composed of 90% stocks and 10% short-term Treasuries. Using historical returns he tracked how the $1,000 would do over a series of overlapping 30-year time intervals. Beginning with the 1900 to 1929 period and ending with 1985 to 2014, he collected data on 86 intervals in all.
To maintain a more-or-less constant 90/10 split, the funds were rebalanced once a year. In addition, he assumed an initial 4% withdrawal each year, which was increased over time to account for inflation.
One of the key metrics Estrada looked for was the failure rate, defined as the percentage of time periods in which the money ran out before 30 years, the length of time for which some financial planners suggest retirees plan. As it turned out, Buffett’s aggressive asset mix was surprisingly resilient, failing in only 2.3% of the intervals tested.
What’s equally surprising is how this portfolio of 90% stocks fared during the five worst time periods since 1900. Estrada found that the nest egg was only slightly more depleted than a much more risk-averse 60% stock and 40% bond allocation.
13   gabbar   2024 Jun 10, 3:38am  

AD says

CMT (constant maturity treasury) now is about 5.1%.

How does one invest in this? Is there a link?
14   clambo   2024 Jun 10, 6:30am  

The fly in the ointment is TAXES.

You have to seek to avoid taxation all of the time or you'll be surprised how fucked up it is when you're no longer working.

Let me tell you, writing a check to Uncle Sambo for $14,000 when you are no longer working is a shock, no matter what you have socked away.

The other $6000+ to the California Franchise Tax Board was the straw that broke the camel's back.

Your 401K has a un-named co-owner; the US Treasury. Uncle Sambo is patiently awaiting you to start spending your nest egg so he can skim off his cut of 20% just when you really need your money to enjoy your final years on Earth.

Get a Roth IRA. Get a Health Savings Account.

Medicare Advantage plans cover most medical expenses, but dental kinda sucks. I recently spent about 8 grand on the dentist; I wanted my large fillings replaced, as well as an old gold crown. Now I have no metal in my mouth and 7 zirconia crowns.

Going to Mexico for dental work is bullshit; spend the fuckin money and have it done correctly up in the United Snakes.
15   GreaterNYCDude   2024 Jun 10, 6:47am  

The bulk of my retirement accounts are in a Roth IRA, and Roth 401ks. My plan is to live off any interested generated by the nest egg and preserve the principal. That can go to my kids and/or charities once I'm gone.

Humble brag, but I'm at right about 7 figures in total savings, and still have 20+years to go. As much as I joke I'll retire once I hit 59.5, if I'm enjoying what I do, I'll keep going, at least part time.
16   HeadSet   2024 Jun 10, 7:11am  

clambo says

The fly in the ointment is TAXES.

GreaterNYCDude says

The bulk of my retirement accounts are in a Roth IRA, and Roth 401ks.

Nice that you had the 401k. The contribution limits of the IRA made it so the vast majority of my savings are in taxable accounts.
17   EBGuy   2024 Jun 10, 1:56pm  

The twenty year window is where things get interesting...

Per Fidelity
18   Ceffer   2024 Jun 10, 2:04pm  

Problem is, you don't know during the cycles when you will need to withdraw funds. The 'worst' time to retire is like now, with rampant inflation eroding the pile whereas projections were made in more halcyon, even handed days. The 'best' times to retire is when assets are increasing steadily for a few years with moderate or low inflation, as you withdraw the money, taking advantage of compounding for the residuals.

Also, a 'loss' in valuation takes a lot longer to recover from (loss can also be just withdrawing for your retirement expenses) than a 'gain' results in lasting value.

If you have to withdraw a lot when markets are crashing and inflation is soaring, then that is not good. People who retired just before these periods when inflation was going up and investment value down, based on 'average' calculations, often found themselves having to go back to work. It's probably not a bad idea to have some pleasant part time work to continue in to offset expenses, or some plan to go back to work if things don't work out according to projections. However, with health problems and age discrimination, that might not be so easy, either.
19   WookieMan   2024 Jun 10, 7:54pm  

Ceffer says

Problem is, you don't know during the cycles when you will need to withdraw funds.

If you're a dual income house max out 401k and live frugally. We have over $1M at 40 with 401k and Roths. 20 more years that will easily be $6M. That's $180k/yr on 3% roughly from dividends, interest and growth all day. Kids move out, so I pay some taxes. Whatever. I won't have a house payment. Assuming SS is still around that alone would cover our funny money like vacation. We wouldn't need to draw $180k/yr. Money keeps growing too most likely.

If you're worried what you need after 50, you're too late to the game most of the time. You need 30 years. So you're working to 80 AND still needing to save. You need to directly invest in RE or stocks to catch up at that point and that's risky. My plan has been doing exactly what I want it to and we can still spend money on fun stuff in our younger years.
20   GreaterNYCDude   2024 Jun 11, 5:39am  

For those projecting out 10+ years, Inflation will be the biggest wildcard, followed by medical costs.
21   clambo   2024 Jun 11, 5:49am  

My medical expenses out of pocket aren't significant. Your results may vary.
This is why you buy an HSA, you can use it for medical, dental, etc.
Medicare premiums for me were $4300 last year, it's deducted from my social security payment.
22   socal2   2024 Jun 11, 9:05am  

clambo says

My medical expenses out of pocket aren't significant. Your results may vary.

Alot of my friends and myself who are doing pretty well and nearing retirement (next 10ish years) are all being told we should have enough money to retire on comfortably (even in SoCal) but healthcare costs will kill us until we reach Medicare age.

We are maxing out our HSA and thankfully very healthy right now. Anything can happen, but still planning/hoping on being able to bug out in my very early 60's and covering healthcare costs out of pocket.
23   clambo   2024 Jun 11, 10:19am  

The problem with heath insurance is before age 65 you aren't on Medicare.
I paid $8000 per year for the cheapest Obamacare before I turned 65.
Obamacare costs vary; if you're 60 something but keep your income low, you're okay.
I still recommend having health insurance of some kind, especially in your sixties.
Living in Florida I saw numerous cases of people suddenly having a problem after age 60.
In my case I was in perfect health, then sore after climbing a sand dune with scuba gear on.
Boom; arthritis which required surgery.
Luckily I was on Medicare so my hips cost $150 and $250 respectively.
24   Ceffer   2024 Jun 11, 10:58am  

You can expect medical insurance costs of 14K to 18K per year in Cali for a couple for every year you are not on Medicare, not including out of pocket expenses if something does go wrong. It still will be thousands every year when Medicare kicks in at 65, though it is directly taken from SS. That has to be factored into 'early retirement'.

If you are a disability grifter, you still have to save money, because that turns to regular SS after age 65, whatever category you are in.

Just take the vax and all the boosters at 60 and DIE, FUCKING DIE, and the government and the banks will be very happy with you.

Retirement is a survival mine field. You'll have to dance faster than they can starve or kill you, while they try to profit from your death and disablement.
25   HeadSet   2024 Jun 11, 12:08pm  

clambo says

Luckily I was on Medicare

Yep, luckily. It is difficult around here to find a practice that will take new Medicare patients, as many folks turning 65 are finding out.
26   clambo   2024 Jun 11, 4:43pm  

I was also in Santa Cruz on Medicare and it wasn't a problem, but I didn't get treatment there either.
27   Booger   2024 Jun 11, 6:16pm  

What's the point in retiring unless you can do it in Caligulan splendor?
28   Ceffer   2024 Jun 11, 7:19pm  

I saw Caligula Dempsey diving in Santa Cruz. Apparently, it's OK for him as long as the weather is nice.
29   Patrick   2024 Jun 11, 7:34pm  

Booger says

What's the point in retiring unless you can do it in Caligulan splendor?

Being able to post whatever memes I want without any fear of getting fired.
30   HeadSet   2024 Jun 11, 7:40pm  

Patrick says

Being able to post whatever memes I want without any fear of getting fired.

FBI: "Challange accepted!"
31   B.A.C.A.H.   2024 Jun 12, 6:00am  

Booger says

What's the point in retiring unless you can do it in Caligulan splendor?

I think compared to most people in the world, a modest retirement life in the US is splendor.

For Caligulan Splendor we can relocate to the Philippines, as some retirees there whom I am acquainted with have done.
32   zzyzzx   2024 Jun 12, 6:34am  

Patrick says

Booger says

What's the point in retiring unless you can do it in Caligulan splendor?

Being able to post whatever memes I want without any fear of getting fired.

You can have enough money to retire, still be working, and not give a shit if you get fired for posting a meme just the same.
33   FortwayeAsFuckJoeBiden   2024 Jun 12, 6:49am  

B.A.C.A.H. says

Booger says

What's the point in retiring unless you can do it in Caligulan splendor?

I think compared to most people in the world, a modest retirement life in the US is splendor.

For Caligulan Splendor we can relocate to the Philippines, as some retirees there whom I am acquainted with have done.

if you compare to shitholes in africa then yes, otherwise it’s modest.
34   Ceffer   2024 Jun 12, 9:42am  

Patrick says

Being able to post whatever memes I want without any fear of getting fired.

You can post differently with financial independence and no employer, or hope for a new employer.

Fact is, I want a reasonable facsimile of truth and just don't give a shit any more, as long as the Goths aren't pounding on the front door, although that's still a possibility.

Even around here we have the incursions of the bots, hall monitors and crypto glowies attempting suasion, disinformation and dominance.
35   EBGuy   2024 Jun 12, 7:24pm  

B.A.C.A.H. says

I think compared to most people in the world, a modest retirement life in the US is splendor.

How much in BONDZ make for a modest retirement, BACAH? Fifty-fifty?
36   casandra   2024 Jun 12, 7:36pm  

Didn't anyone mention here having good traditional retirement plans or is that assumed in all the calculations being written here. And don't say they no longer exist. That may be true for the nowadays, but how many millennials and Gen x & z ers are on this board.
37   Blue   2024 Jun 13, 12:33am  

Retirement Calculator: Free Estimate of How Much You Need
38   zzyzzx   2024 Jun 13, 4:41am  

casandra says

Didn't anyone mention here having good traditional retirement plans or is that assumed in all the calculations being written here. And don't say they no longer exist. That may be true for the nowadays, but how many millennials and Gen x & z ers are on this board.

I would assume that almost nobody here has a defined benefit pension plan. Gen X here, no defined benefit pension.
39   clambo   2024 Jun 13, 6:40am  

I'm replying to things here and there above.
To clarify; if you retire before 65 (Medicare), you are retiring a bit early, but it's still a good thing to do if possible.
From age 60 to 65, you can expect to be buying Obamacare insurance, which is either cheap or expensive depending on your income.
Maybe you can refrain from spending retirement accounts to keep your income down a little.
If you are healthy, you can still expect to have some procedures, herewith some of them:
Colonoscopy, cataract surgery (LENSAR is state of the art), Mohs surgery for skin cancer, and later arthritis (50% probability).
You might dodge the bullet for arthritis.
My experience was after 65 most medical things out of pocket were inexpensive; by contrast I've spent more on dental work even with Delta Dental insurance.
An odd experience for me has been the doubling of my net worth since I started Medicare; now my only concern is my health.
40   B.A.C.A.H.   2024 Jun 13, 7:39am  

zzyzzx says

almost nobody here has a defined benefit pension plan

What is a "defined benefit plan"?

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