Retirement. It’s the dream we’ve all been sold, and the dream that many of us are working toward tirelessly. For most, it means hitting 65, packing the job in, and enjoying your golden years in comfort, free of stress, and possibly somewhere sunny. On its surface it sounds pretty nice, right? For many Americans, particularly those of the baby boomer generation, this is the dream they’re living right now. But what about those who have yet to retire?
Well, the first thing to consider is the number. Or, in other words, the number that you need to retire in style, without giving your finances a second thought. This figure will obviously differ from person to person, as we all have different ideas of “in style,” but according to a recent study from Northwestern Mutual1, the number is $1.46 million.
Without any context, this number may not surprise many people. If anything, it probably sounds pretty reasonable. What you may be surprised to learn is that this is 15% higher than what people thought they needed last year. Furthermore, it is 53% higher than the ideal amount people pictured themselves with in 2022. It seems that everything is getting more expensive—including the price to enjoy your so-called “golden years.”
This trend speaks to what you’ve likely heard your friends discussing over happy hour and barbecues the last few years—not when they’ll retire, but if they’ll actually be able to do so. If you believe that you won’t be able to, it’s a pretty grim outlook on a future that you’ve been working so hard toward. All that sacrifice, time away from the family, and hours spent at the office, and nothing in the end to enjoy. To add to this sobering reality, enter Larry Fink, the billionaire co-founder and CEO of BlackRock.
In his most recent annual investor letter, he outlined the retirement crisis on the horizon and the need for governments and corporations to respond before things get worse. In short, it’s pretty tough reading.
So, you want to retire with a degree of comfort. But in this climate, how can you do so? Retirement planning isn’t a “nice to have” anymore, it’s a must, should you wish to say goodbye to the boss and put your feet up at some point.
The Problem
The first thing is to understand what retirement might look like for you. Medicine is getting better every single day, meaning that people on average are living longer than ever before. If you retire at 65, and live until the age of 85, that is 20 years you need to cover. If you’re lucky enough to live another 10 years, you need to hope you have enough squared away to make it 30 years without any additional income. This is known as longevity risk, and is a very different proposition from our ancestors. This means the first factor of your retirement equation is time—mainly, how much time do you need to be covered for.
The next factor is cost. To make this simple, let’s treat this cost as an annual figure that you’d like for the year—essentially a salary that you pay yourself. For the sake of this example, let’s use $100,000 to live comfortably wherever your dream location may be.
With this goal, to retire for 10 years, you need $1 million saved up. Should you wish to retire for longer, you need $2 million for 20 years, and $3 million for 30. This is already well above the number outlined by Northwestern Mutual. And it doesn’t take into consideration inflation, taxes, and leaving any assets to the next generation.
“But Jason,” I hear you say, “I’ll hopefully have paid off my mortgage by then, and my expenses won’t be as high, so I won’t need that much money.”
This is very valid, but this is not where your costs will come from. You may not have a mortgage, but at the age of 65-plus, your medical bills will not only be higher, but likely more frequent. On top of that, you may not want to just sit at home. You probably want to travel or take up a new hobby, all of which will come out of your finite retirement fund. After all, this period of your life is meant to be enjoyed, not counting beans and balancing budgets.
In other words, this “$1.46 million magic number” is fairly redundant. I imagine for you, dear reader, this figure is too low. If you have a higher income and want to maintain the lifestyle you’ve been used to, you may need $200,000 a year, or even $300,000. Which, if this is the case, means you may need a minimum of $6.6 million-$10 million waiting for you when you retire.
The Solution
At JWA we believe building wealth is by choice not chance, and we help you take matters into your own hands. We’ll coach you through the key factors that can shape your and your family’s financial strategy for the future.
- Retirement Preparedness—Examining what your retirement might look like comes down to time, calibrating your working years until your planned retirement, etc.
- Financial Considerations—Building a tailored plan that addresses inflation, health care costs, familial obligations, and more.
- Retirement Solutions—Optimizing for things like an employer-sponsored 401K, to exploring other investment opportunities. A well-crafted long-term strategy is built through a series of purposeful decisions within a strategic roadmap.
JWA is here to help you build generational wealth and create the secure future you’re working so hard to achieve. We’re a boutique financial advisor with concierge advantages. Get in touch, let’s talk, and develop your wealth-build by choice, not chance. www.juliuswealthadvisor.com
Source:
- CBSNews.com: Here’s how much Americans say they need to retire—and it’s 53% higher than four years ago. https://bit.ly/4bmzl99
Jason Blumstein, CFA® is the CEO and founder of Julius Wealth Advisors, LLC (www.juliuswealthadvisors.com), a registered investment adviser in Englewood Cliffs, New Jersey. He is also the host of “The Big Bo $how” podcast. available on YouTube, Spotify and Apple Podcasts. Jason has been investing and educating himself on personal finance since the age of 10. His company aims to elevate your wealth-building game plan with integrity, knowledge and passion, unwaveringly devoted to a collaborative, highly personalized style. Jason currently resides in Englewood with his wife and two kids. He can be reached at 201-408-4644 and/or [email protected].
Disclosures: This piece contains general information that is not suitable for everyone and was prepared for informational purposes only. Nothing contained herein should be construed as a solicitation to buy or sell any security or as an offer to provide investment advice. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. Past performance does not guarantee any future results. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. For additional information about Julius Wealth Advisors, including its services and fees, contact us or visit adviserinfo.sec.gov.
