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Wealth Analytics: How Much Do You Need To Retire?

How much do you need to retire?

I don’t know about you, but every time I see headlines that say, “Top 10 Reasons” or “How Much Do You Need?” I click on it. So when I saw the CNBC article, “You’ll need at least $1 million to retire comfortably in these 10 U.S. States,” I couldn’t help myself. There were no surprises on the list. California, New York, and Hawaii held three of the top four spots. What I was looking for were details. For example, did the survey consider Social Security? Did it look at all assets, such as your home, or only investable assets? How long was “retirement” for the calculation? Unfortunately, not too many details were provided.

As it turned out, the article was based on the 2024 Planning and Progress study by Northwestern Mutual. The study found that U.S. adults believe they will need $1.46 million (see table) to retire comfortably, which was a 15% increase from 2023.² What’s more stunning is that the “magic number” has jumped 53% from the $951,000 in 2020. Yes, inflation has been high in recent years—but not 53% high!

Remember, these aren’t calculated figures based on financial planning models. These are the beliefs of the people surveyed. So, what views are contributing to this large jump?

      • Inflation: 51% of those surveyed identified inflation as the biggest obstacle to their financial security in retirement.
      • Economy: 43% named the economy as their #1 concern.
      • No Savings: 31% cited a lack of savings as their obstacle to retirement. 

Even though year-over-year inflation has been trending down, investors are experiencing decreased purchasing power every visit to the grocery store and in their monthly bills. Household income is not outpacing inflation for most surveyed. Jeff Poole, Principal Advisor of Wealth Analytics based in San Diego, says some investors’ behaviors might be changing in response to increased financial insecurity. 

“The recent rise in inflation beginning two years ago has given investors a reason to re-think their investment strategies. Retirement may cost more than expected, especially healthcare, and retirees that have been in their homes for a couple of decades are experiencing more costly home repairs and upkeep that they didn’t expect,” says Poole. 

“Future retirees are anticipating the possibility of needing to support their kids a bit longer after college as they get started in their careers. All of these factors are weighing in on how to invest so as to increase the likelihood of a meaningful and secure retirement.”

Mr. Poole expressed that for those concerned about retiring and staying retired, this is an important time to create a financial plan. “Every person’s retirement is unique based on their assets and financial and personal goals,” says Poole. “With accurate data, a financial plan can assure an individual, couple, or family that they have enough – the magic number for them – to retire and meet their financial needs.” 

As a financial mentor, he believes “people should look forward to this next chapter of their lives with confidence.” A click-bait article beginning with “How Much Do You Need,” provides entertaining and slightly alarming information, but it’s not helpful when creating a retirement strategy. 

So, when you see this type of content, click on it, read the details, and then bring your questions to a financial planner who can truly give you your own personal “magic number.”

1., April 2, 2024. “You need at least $1 million to retire comfortably in these 10 U.S. states–half are in the Northeast.”
2., 2024. “Planning & Progress Study 2024.”

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