Investing

The Magic Number For A Secure Retirement

Austin Smith

Published: July 17, 2024 10:14 am

Last Updated: July 18, 2024 9:54 am

The Feel Good Retirement Number

A recent Federal Reserve survey revealed that most Americans need more than half a million dollars in savings to feel financially secure in retirement. The survey indicated that a significant number of retirees need at least a million dollars to feel comfortable. This underscores the importance of psychological security in retirement, highlighting that a higher savings target is necessary for a mentally satisfying retirement.

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Transcript:

Austin, aiming for retirement may be in for a rude awakening.

Recently released data from the Federal Reserve not only revealed how expensive retirement can be, but just how difficult the situation is for many Americans today.

So the big question is, what exactly is going on?

Yeah.

The Federal Reserve released a survey of household economic and decision making, which included some really illuminating details about American struggles in retirement, particularly how they feel about retirement.

So this report draws from the board’s 11th Annual Survey of Household Economics and Decision Making, acronym SHED, which examines the financial lives of U.S. adults and their families and includes responses from 11,000 adults.

It’s a really robust sample set.

Now, notably, this includes subjective questions like whether people are comfortable or doing okay in retirement.

And a lot of people want to put a lot of precision on retirement.

What is my number? How much do I exactly need to live a good life? What are my expenses each year?

But fundamentally, what really matters is how do you feel about it?

If you can make ends meet, but you feel like you’re on a knife’s edge, it’s not a comfortable retirement. It’s not the place you want to be.

So it started to include questions highlighting the difficulty of meeting various expenses like bills or groceries.

And it gives us a great picture of how Americans are feeling about retirement.

And unfortunately, it’s not pretty.

So the largest group of financially secure retirees, which is 31%, had more than a million dollars.

The second largest group at 19% of respondents have between half a million and a million dollars.

And the third largest group at roughly 17% have between 250,000 and half a million dollars.

So that is roughly two-thirds of financially secure retirees had at least a quarter million dollars in savings.

So the bottom line is, is that most people will need more than half a million dollars in savings at retirement to feel financially secure.

And I should note this is an at least number.

And the data suggests that people may very well need more than that to feel financially secure.

In addition, this only applies to individuals.

So for couples, it could be higher and likely close to, if not above, $1 million.

So the whole takeaway here is that the magic number for an emotionally secure retirement that makes people feel good is likely in excess of $1 million.

Even if someone could get by with less, they might not feel good about that.

And retirement is all about enjoying yourself.

So the magic number that we want people to kind of think about to feel comfortable in this new stage of life for couples is probably in excess of a million dollars.

Wow. Austin, these are really revealing numbers because as you’ve talked about, so much of retirement is psychological.

That is, if you don’t have purpose, you’re not shooting for the right kind of retirement because you’re not going to have the mental satisfaction.

This once again shows being mentally secure is going to require a higher number than just about anyone would think from previous studies.

So I think it’s eye-opening and people need to be honest with themselves because as you said, if you’re not mentally secure, you’re not going to be able to enjoy that wonderful retirement that you’ve been planning on.