How much money will you need to retire? Financial advisors have frequently recommended a $1 million nest egg for a comfortable retirement, but there's no one-size-fits-all magic number. Have you ever figured out how much money you'll need? According to our new survey, you haven't.
How much money will you get when you start collecting Social Security? Sure, it will depend on when you apply for benefits and other variables, but have you even bothered to see your latest estimates from the Social Security Administration? Once again, it appears most people haven't bothered.
If you haven't done either of the above key steps to retirement planning, you're not alone. But don't worry; we'll give you the tools to do them both, easily and at no cost.
In an exclusive MoneyTips online survey, 452 Americans were asked about preparing for retirement. Some of the respondents were already enjoying retirement, while others were decades away from collecting Social Security.
We asked the subjects yet to retire:
More than 3 out of 5 (63.4%) Americans have never picked a target amount to save for their retirement! About 1 out of 3 (32.4%) people who did pick an amount thought the figure was under $1 million; the same percentage (32.4%) picked a number from $1-1.5 million.
Says Brian Saranovitz, co-founder and president of Your Retirement Advisor, "I find when meeting with individuals for the first time they typically have no idea how much they will need to be able to retire. The typical answer of $1 million is absolutely worthless since everyone has different income requirements and different income sources that must be added into the equation when determining when and how much will be necessary."
Income had a lot to do with whether a future retiree had picked a target number. More than 2 out of 3 people (67.7%) in families whose annual income was $150,000 or less had not selected a target. In families making more than that, 3 out of 5 (60%) had picked a retirement amount. For those who did pick an amount, the most popular selection among the lower-income families was under $1 million; for higher incomes, more than $2 million.
Men (42.4%) were more likely to have picked a retirement target than women (32.1%) were. Among those who did so, men's most popular pick was more than $2 million (30.6%), while women's was under $1 million (40%).
If you want to turn your 'No" answer to an informed 'Yes', use the free Retirement Planner by MoneyTips to help you determine how much you need to retire. You may not like the answer it generates, but the quicker you start planning for it, the easier it will be to achieve.
We also asked people yet to retire:
Nearly half of the respondents have never bothered to check their Social Security benefit estimates, while less than 1 in 3 (30.9%) have checked within the last year. Despite the fact that nearly nine out of ten individuals age 65 and older receive Social Security benefits, nearly 25% of respondents expected no benefits!
Women (56.0%) do a better job than men do of checking (50.6%), as do people from high-income families when compared to lower-income families. More than 3 of 5 (62.9%) of those in families earning less than $50,000 annually never check their Social Security estimates, compared to less than 2 of 5 (37.1%) of those in families earning more.
If you haven't done so, now's the time. You can check your estimated benefits by establishing a my Social Security account on the Social Security Administration website. Keep in mind that these estimates are subject to significant change for a variety of reasons, including future legislative actions.
"Social Security makes up about 34% of a retiree's retirement income," says Saranovitz, a financial advisor based in Leominster, Massachusetts. "For many, this is the main source or largest source of income. It's important to get your filing strategy correct as well as incorporate this projected amount into your overall retirement income projection. Simple calculators are fine to give an indication of how long your Social Security benefit will last, but you must integrate all your income sources together and deploy smart income planning strategies."
"People can use Fintech and financial tools to assess their current situation to see where they are and that will help them do a roadmap to where they should be," says Consolidated Credit Director of Education and Public Relations April Lewis-Parks. She thinks consumers should test various scenarios like, "'Okay, if I put my retirement fund 1% up, how much more money will I save over 30 years?' And I think once people are aware of how little changes have a huge impact, then they will start to make those changes. Fintech has made that so easy for the regular person to understand."
Regardless of where you plan to retire, the number one factor in ensuring that you can retire on your terms is your 401(k). Make sure that your 401(k) is maximizing its potential with this free analysis that checks your fees, fund mix, and other factors to help you hit your retirement goals. For more of our exclusive retirement data and insights, visit MoneyTips Retirement Survey Findings.