How much money is enough money to retire? That’s a question Seattle-area Elder Law Attorney, Rajiv Nagaich gets frequently on his radio show.
Say, for instance, that you have $1 million in your retirement account? Is that enough?
I’m going to use one of Rajiv’s expressions here and say, “it depends.”
It depends upon what sort of lifestyle you want to live. A decade or so ago, $1 million was a lot of money but this article from USA Today warns that the new $1 million is probably actually $2 million. The biggest reason that Rodney Brooks, the article’s author, gives for that is that our current lifestyles make $40,000 to $50,000 a year too little for many (that’s what $1 million over a span of a couple decades looks like). Moreover, with interest rates so low, that $1 million no longer generates the additional income it did in times past.
Hopefully, once you’ve retired, you are no longer paying a mortgage or paying for a kid’s college education. For most people, those two items are their biggest expenses prior to retirement. If you’ve planned right, you don’t have those expenses but that doesn’t mean you won’t have some equally intimidating costs arise. For instance, the cost for traveling or a second home or whatever dreams you’ve put off until retirement will replace those other costs. Unfortunately, for a fair number of people, so will their medical costs.
If you can contain all those costs by not retiring until your mortgage is paid off and by investing in your health by hiring health professionals that deliver preventive medicine rather than rely on curative medicine, $1 million is doable with a caveat.
The caveat is that you’ll still have to control your cash flow and that requires a financial plan that can help you manage the re-distribution of your wealth. If you’ve listened to Rajiv for any time at all, you know that that financial plan is a financial dashboard.
The problem is that retirement is a multi-faceted situation. It isn’t just about the money. If you want to get a better handle on all the things retirement involves, come to one of Rajiv’s free seminars and see why retirement planning requires an understanding about housing, health, financial, legal and family resources and opportunities. Then you’ll have a better idea about whether or not $1 million is enough to retire on.