In preparing for retirment and speaking with some financial advisors, I have some sobering news for my fellow Baby Boomers who are feeling smug about accumulating $1m in their 401ks.
Turns out having a million dollars in your 401k is hardly going to give you the kind of luxury lifestyle you were maybe counting on in retirement if all you have other than that is Social Security.
With one million dollars in your retirement account at 62, no financial adviser worth their salt will have you take more than 4% of that in your first year of retirement.
That's just $40,000 a year. Now assuming you have a typical $2,000/mo Social Security benefit at age 62, that totals just $64,000/year.
Now some people can swing that, especially if they are debt free. But you will be clipping coupons and lining up for the early bird specials at your local diner just the same. $64K a year will not fund the typical retirement dream of belonging to a swanky golf club and travelling the world at leisure.
Most of my career, achieving $1m in my retirement plan was a target I worked hard to attain. But if I could do it over again, I would have set the target closer to $3m and maxed out my annual 401k contributions, with some Roth to boot.
That’s about where I’m sitting, however, I have no desire to join a swanky golf club nor to live in luxury. We just bought but haven’t received yet a rooftop tent camper for my pickup truck. That’s my idea of swank.
I guess I wish I had set more aside, however, our lifestyle didn’t afford it. We raided our children with a full-time mom and home school educator which we felt was more valuable than a healthy bank account.