Yahoo Finance 4 Signs $250,000 Won’t Be Enough for You To Retire
Most Americans agree that $250,000 in savings won’t be enough to fund their retirement.
Even if it were enough, most Americans report that they don’t have $250,000 in retirements savings, according to a GOBankingRates poll of 1,037 respondents age 18 and older, conducted last month. That includes the majority of those either close to or at retirement age.
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Nearly 80% said they’ll need $250,000 or more, but only 11.7% said they have reached that savings milestone. That includes just 18.8% of respondents age 55-64, and 28.8% of those 65 and older.
“The numbers are unfortunately not surprising,” said Rob Williams, managing director of wealth management at Charles Schwab. “This is a challenge for many, many people.”
“Life for the average American household has been challenging in recent years,” added Rita Assaf, vice president of retirement products at Fidelity Investments. “We witnessed a global pandemic and record high inflation that forced Americans to re-evaluate everything, from what’s most important, to where to live and work, to how to allocate budgets.
“As Americans have continued to navigate through turmoil and uncertainty, it’s no surprise that people have pulled back on saving for the future.”
Could you retire comfortably with $250,000 in savings? It would be challenging if not impossible for many of us, experts say — adding that there are numerous variables to consider. Even adding in Social Security may not get you there, if you’re eyeing a 25-year retirement or longer.
“If someone makes the average Social Security amount ($1,706 a month), then they would have to live pretty cheaply,” said Carolyn McClanahan, a CFP with Life Planning Partners, Inc. of Jacksonville, Florida. “Using income and principal at a 6% return for 25 years minus 3% inflation — that $250,000 would provide another $926 per month. I don’t know how many people could live on $2,632 a month.”
All that said, it boils down to understanding how much you’ll need to spend.
“The most important factor is how much does a person need for their lifestyle, then you back into how much they need to have saved,” McClanahan said.
Read on for four specific warning signs that $250,000 wouldn’t be enough to retire, whether you’ve got it or not — or if you’re interested in the flip side, here’s a story on signs that $250,000 will be enough.
Your Other Sources of Income Are Limited
Most of us count on — or will count on — Social Security to supplement whatever retirement savings we have. A significant amount of us plan to totally depend on Social Security benefits after we quit working.
In the GOBankingRates survey, 23% of respondents said they planned to live off of Social Security and nothing else during retirement. That included 30% of those age 55-64 and 34% for age 65 and up.
While many people do survive on Social Security alone, Williams noted that it was never intended to be a full-income replacement. Adding the average benefit to $250,000 in savings, spread out over 25-30 years, will still leave many retirees short, he said.
“I think it’s appropriate to say that this may not be enough for a comfortable retirement for most Americans,” Williams said, also noting that “not everyone who retires at 65 years old lives until 95.”
Still, he recommends factoring in Social Security, pensions and any other income sources, then matching things up against realistic projections of what you’ll need to spend during retirement. If your Social Security benefits are on the lower end and you lack other sources of income, consider it a sign that you may need to wait longer before quitting your job.
“Or save more, spend less,” Williams said. “There’s no magic.”
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You Don’t Have a Robust Emergency Fund on Top of Your Retirement Savings
Financial planners love to stress the importance of emergency funds. For many, having one is second only to killing debt on their list of top financial priorities.
Williams said that retirees already “think they will spend less than they do.” If you also throw in the occasional unexpected home repair, sudden need to assist a family member or other surprise, your money could slip away much more quickly than planned. Unless you’re prepared.
“You’ll need some flexibility for any emergencies, so this is where it’s important to consider having an emergency fund,” Assaf said. “There is no one-size-fits-all retirement plan, but being clear on your goals and having a plan in place can make a big difference in ensuring your savings last.”
You Still Have Debts To Pay
Assessing any debt you have is a crucial part of any retirement planning. The proverbial weight around your neck can feel even more burdensome as your accumulation stage fades and your decumulation phase begins.
If your mortgage isn’t paid off, if you’re carrying heavy credit card debt or if you’re in the hole in some other area, beware of retiring before it’s taken care of. You might also consider tackling the debt with at least some of the savings.
You Don’t Have a Plan
Whether you have $250,000 in savings or not, retirement requires a robust plan around spending and other factors, Williams said.
Oh, and don’t expect to sit down with a pencil and a pad of paper and figure it out on the spot, either.
“One of the biggest mistakes is not having sat down and done some sort of plan,” Williams said. “It’s a process. It’s not a day. If you haven’t planned ahead, phased into retirement over a period of years, that’s probably a pretty good sign [of not being ready].”
GOBankingRates surveyed 1,037 Americans aged 18 and older from across the country between Sept. 5 and Sept. 7, 2023, asking fifteen different questions: (1) How much money do you currently have saved for retirement?; (2) How much money do you think you’ll need in retirement?; (3) How much do you spend or expect to spend monthly during your retirement?; (4) If you aren’t yet retired, how much do you expect to get from Social Security during your retirement?; (5) How much of your retirement do you plan to fund with Social Security?; (6) At what age did you or do you plan to claim Social Security benefits?; (7) Did you or do you think you will have to move to afford your retirement?; (8) Which of the following proposed Social Security solutions do you think would work best to prevent the trust fund from being depleted?; (9) What sources of income will you have in retirement? (Select all that apply); (10) How confident are you that you will have saved enough to afford retirement?; (11) If you retired early, at what age did you retire?; (12) Are you counting on help from your family (financial, housing, long-term care, etc.) to afford retirement?; (13) Do you think retiring around age 65 is financially possible for most Americans?; (14) What worries you financially about retirement? (Select all that apply); and (15) If you got a stimulus check in the last two years, how much of the money did you save for retirement?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.
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This article originally appeared on GOBankingRates.com: 4 Signs $250,000 Won’t Be Enough for You To Retire
