You’ve heard it all before. Get to a certain dollar figure and you’ve “made it”. Often times that figure seems to be $1 million in savings. This statement that $1 million is enough to get a person through retirement is just way too simplistic and a dangerous proposition. For starters, the age one retires and the life expectancy based on genes and health will have a huge impact on this. A frugal person can make $1 million go a lot further than say one who’s planning on taking out $100,000 every year in retirement distribution. Other sources of income also play a key role (e.g. social security, pensions, part time income, inheritances, etc). People often forget that unplanned medical expenses can eat through a few hundred thousand easily, so $1 million would not be enough if the proper type of health or long-term care insurance is not in place.
Of course, another key factor is debt, something that most of us (unfortunately) posses. A person with $1 million in savings and $1 million in debt is probably not the same as one without the debt. The amount you have when you retire could easily shrink depending on how it’s invested. The old adage about taxes “it’s not what you make, but what you keep that counts” applies. If a retiree invests their $1 million aggressively and we experience the types of volatile markets we’ve seen over the last 10 years, $1 million can be quickly consumed when you’re in the distribution phase of your life.
Don’t Rely on Uncle Sam
Relying solely on Social Security and Medicare is risky business. We’re already seeing benefits go down and payments (Medicare premiums and out of pocket) go up and we likely haven’t seen the worst of it. I don’t expect Social Security and/or Medicare to disappear, but chances are qualifying/retirement ages will go up and benefits down. Let’s start to look at these programs as supplementary to your own savings and investing vs. the cure for your retirement plan.
Jose Freyre, MBA, CFP® is Founder of Milwaukee-based Monarch Wealth Management (www.monarchwm.com),an independent wealth management and investment planning firm serving the needs of individuals, families, and business owners. Mr. Freyre can be reached at 414-935-4900 or via email at jfreyre@monarchwm.com.
Securities offered through LPL Financial, Member FINRA/SIPC
This material was prepared for Jose Freyre’s use.
