Let’s get uncomfortable.
This is one of those topics that a lot of us try not to think about.
Whenever it comes up, we often complain about how no one ever taught us how to do it.
“How was I supposed to know?”
Yeah, as if public libraries and bookstores don’t have entire sections dedicated to it. As if there weren’t about a million YouTube videos about it. All of which were always just a simple search away, while we watched cat videos and grandmas doing the Griddy dance on TikTok.
But I digress.
Despite the fact that one of our greatest fears is outliving our money, most of us are way behind on our retirement savings.
Not only do we generally lack basic financial education, most people have no idea exactly how much money they’ll need to have socked away so they can retire comfortably.
Just this past week, Northwestern Mutual, the financial services firm, released the results of a survey asking participants about their “magic number.” In other words, how much money they think they’ll need to retire.
Average magic number: $1.3M
Average amount saved: $89.3K
Yikes.
Not only are our current savings falling well short of our magic numbers, but our magic numbers are falling short of how much we’ll actually need.
Most finance experts recommend that we have 20-25 times our estimated annual budget saved for retirement. For example, if you need $100K a year to live comfortably through your golden years (don’t forget about inflation!), you’re gonna need at least $2M in your retirement account. With $2M set aside, you’ll live off the estimated (though optimistic) 6% interest. Which comes out to $120K a year minus taxes, plus Social Security.
On the other hand, if you only have $100K saved on your 65th birthday, you’ll be pulling in a grand total of $6000 annually (pre-tax), or $500 a month.
Shacking up with the kids, for sure!
I know, this kind of real talk will make your stomach turn. But avoiding it won’t make it go away.
Over the past year, I’ve read dozens of finance books. If you’re looking for a solid recommendation on the basics, try Unshakeable by Tony Robbins. When you finish Unshakeable, pick up Tony’s 600-page beast Money: Master the Game.
But for now, do the math. Calculate your magic number (your estimated annual budget multiplied by 20). Let that number soak in. With a sound strategy, self-education, compound interest, and the support of a registered investment advisor, YOU CAN capture the magic.
And don’t miss today’s Finance Friday episode with Denis Waitley who discusses the importance of GETTING SPECIFIC when it comes to your financial goals.
