The subjectivity of a question like “How much is enough?” is often predicated on demographic expectations. Statisticians and data analysts have spent countless years refining filters to better classify different demographic categories to better conduct predictive analysis for a wide range of topics. 

Northwestern Mutual conducts an annual nationwide survey called The Planning and Progress Study respondents come from a wide cross-section of different groups that can be categorized by age, financial status, race, marital status, and a host of other factors. The question of what would be the minimal amount to retire comfortably, i.e., maintain a current lifestyle, had a range of responses, based on age bracket and net worth.

How Much Is Enough To Retire Comfortably?

From an age perspective, Boomers who often already were in retirement or approaching it, averaged a response of $990,000. Gen-X, some of whom are approaching age 60, anticipated $1.56 million, while Millennials and Gen-Z, perhaps more sensitive to the impact of inflation and its sway over housing, food, and child care prices, came in at $1.65 million and $1.63 million, respectively.

High Net Worth ($1 million+) respondents averaged a projected $4 million target as the minimum amount to retire and live comfortably. There is clearly a significant difference between how those with over $1 million net worth define “comfortably” than the rest of us.

A Comfortable Retirement Defined

When it comes to the various parameters that can determine the level of comfort for one’s retirement, these can include the following:

• Anticipated cost of living
• Long term Healthcare expenses 
• Inflation
• Life expectancy
• Fixed monthly expenses
• Discretionary spending
• Retirement destination
• Retirement income streams

The primary difference for people with high net worth is in how much they can afford to spend above what people of lesser means have at their disposal. Life expectancy, Inflation, and Long term Healthcare expenses are equivalent aspects in both camps, and mankind’s ability to manipulate fate for those categories is unequivocally minimal. There can be greater variation for the others, which may explain why people with net worths over $1 million arrive at a “comfortable” retirement sum that is quadruple that of the average Boomer. 

• Anticipated Cost of Living – Cost of Living is a category that can have a very broad variance between individuals, even regardless of tax bracket. There are multimillionaires who are skinflints (think Ebeneezer Scrooge from Charles Dickens’ A Christmas Carol), and then there are some who are extraordinarily generous. 

However, cost of living generally refers to housing, food, taxes, and healthcare expenses. Wealthier people often live in more expensive homes, pay higher taxes, and generally spend more on higher quality food. 

• Fixed Monthly Expenses – a more expensive lifestyle entails higher monthly expenses. A home with a more elaborate security alarm system; a pool and associated water and maintenance costs; 2 or more vehicles, and landscaping maintenance for surrounding grounds of a private home are just a few of the monthly expenses that the wealthy may carry that are inconsequential to others. 
• Discretionary Spending – For those with the wherewithal to regularly spend on restaurants, facials and massages, concert and sports event tickets, and travel, a corresponding discretionary spending budget needs to be large enough to accommodate. 
• Retirement Destination – Many Americans choose to retire to states like Florida or Texas, not only for the warmer climates but also due to the lack of state income tax. Others may opt to retire to other countries which sport a lower cost of living where one can stretch the US dollar spending capacity, in countries like Greece, Portugal, or Costa Rica. Wealthier people have more options and can choose to remain in their current state or even relocate to countries that may have equivalently high cost of living rates. This is because they can afford to choose based on personal quality of life preferences, rather than concerns over sufficient fund reserves. 
• Retirement Income Streams – One of the most significant investment advantages for the high-net-worth party over one of more modest means, is the ability to access the private investment sector. The access is due to: 

1) Informational access, and  2) Paying for the admission ticket.

The ability to afford investments in lucrative private sector opportunities, like private companies in the pre-IPO stage or real estate, can make for sizable passive income streams. The differential between conventional stock and bond returns can amount to tens of thousands per year.

This article is intended to be construed solely for informational purposes. A financial retirement professional should be sought if consultation for greater details is desired.

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