Is $1 Million Enough to Retire?

Who Said You Need Millions?

The funny thing is that a "modest" retirement will be just fine for most Americans.

In 2007, the median annual household income was about $50,000 according to the Census Bureau. That's figure is "household income." The average household size in America is about 2.5 persons. So let's do some math. First, let's assume that your household in retirement will be only 2 persons (that .5 of a person in your average household has gone off your payroll). That means an average household perhaps would have spent spent only 80% of the $50,000 annual household income on themselves (this number is probably less). That would be only $40,000 per year. Now, many "experts" say you'll need 80% of your pre-retirement income in retirement (a number which I think is way too high). But let's assume these "experts" are correct. Perhaps then, the average retired couple would need only 80% of the $40,000 to maintain the same standard of living in retirement. That, would be $32,000 a year. Then you get to subtract from that figure all the expenses you won't have after you're retired, like income taxes, FICA deductions, retirement savings, work related expenses, etc. Sure, some things will cost more, health insurance for one, and you'll need a lot more if you're retiring in an expensive place like New York City or San Francisco. But you get the picture.

So it's true that you can retire with "only" a million. And the good news is that many folks will be able to retire on a lot less.

Jonathan D. Edelfelt, author of Who Said You Need Millions? Retirement Strategies for the Rest of Us.

www.whosaidyouneedmillions.com

Jonathan D. Edelfelt of TX @ Sep 21, 2009 18:58:27 PM