Is $1,000,000 enough to retire?

You might need more than a million dollars to do so! In this video, we explore the results of a recent LendingTree study that shows just how much you need to retire comfortably. You'll be surprised to find out that the average amount needed in the U.S. is $1.07 million! But, depending on where you live, that number can skyrocket. Find out which cities require the most and the least to retire with an average lifestyle.

And don't forget, all these numbers are just averages. Every retiree's lifestyle is unique and will depend on their specific needs and savings strategy. In this video, we also discuss the importance of focusing on your income needs rather than the dollar amount in your portfolio. We also cover the 4% rule and why it might not be suitable for everyone's retirement and when it might make sense to utilize Roth accounts to help with taxes.

Lending Tree Study: https://www.lendingtree.com/home/mortgage/most-to-retire-study/

WSJ Article: https://www.wsj.com/articles/heres-what-a-1-million-retirement-looks-like-in-america-11671890735

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Read The Transcript

Is a million dollars enough to retire off of? A recent study shows that you might need a lot more than a million dollars to retire comfortably. In this video, we are going to take a look at whether or not a million dollars is enough to retire on and what kind of lifestyle you can expect if you retire with one million dollars.

Hey there, it’s Johnathan Rankin with Theorem Wealth Management, where our goal is to help you maximize your retirement.

A lot of people have a goal of getting to 1 million dollars in savings, but even if you hit that goal, what does that mean for your retirement lifestyle and is that even the right number to shoot for. A new study shows that if you want an average lifestyle in retirement, you might need quite a bit more than a million dollars. The new LendingTree study calculates how much people need to retire in each U.S. metro area based on the amount retirees spend in a year and on the median annual earnings of people between the ages of 55 and 64.. According to the study, you would need an average of $1.07 million to achieve the national average retirement lifestyle. But that’s the national average, that number can vary greatly depending on where you live. For example, in the most expensive city to retire in, San Francisco, you'll need about $1.37 million! And in case you're wondering, San Francisco is followed by New York ($1,315,587), San Diego ($1,298,796), Honolulu ($1,288,763), and San Jose ($1,276,997) as the top 5 most expensive metro areas to retire in. Now, If you're looking for a more affordable option, Johnstown, Pennsylvania is the only metro area where you can retire with an average lifestyle for less than $800,000, coming in at just $779,765. The next closest options are Cumberland, Maryland ($802,988) and Danville, Illinois ($804,301).

To calculate these amounts LendingTree analysts used data from the Bureau of Labot statistics. They estimated the annual expenditures of retirees, calculated the pretax amount by assuming a 22% federal tax rate and applying applicable state taxes, and subtracted the average annualized Social Security retirement benefit for each state. This determined the remaining income retirees would need, on average, to maintain that level of spending. They then divided that amount by 4% to apply the “4% rule” and calculate the necessary assets required to meet the average spending level.

It is important to remember that all of these amounts are to get you an average lifestyle in each of these cities. Which makes you wonder, what is average? The study used data from the Bureau of labor statistics and In the most expensive city of San Francisco, the average spend was $64,545, which meant before taxes, you would need $78,745. As you can see the others in the top 5 most expensive cities, the lifestyle need is around 75K before taxes as compared to the cheapest cities at around 56K

Whether that is enough or not will be dependent on your retirement needs. That is why it is important to focus more on your income need rather than a total portfolio amount. In this study, they also used the 4% rule as a general rule of thumb, which can be debated whether or not that is an appropriate rule to use. We believe that it is a good starting point, but ultimately retirement should not be looked at as something you can be extremely rigid about. There has to be room for flexibility.

This study also did not consider any portfolio growth as it was really just a snapshot in time looking at cost of living today and so when thinking about what your individual living expenses will be as you retire will be important to consider. There was an interesting article in the WSJ that I will link to in the description that talks about what $1 million retirement looks like. They highlighted 4 retirees who discuss their retirement lifestyle. All have over 1mm in savings and investments and their lifestyles range from 50k to 100k. What was interesting about the article is that each one of the retirees they highlighted is that each story was completely different and it shows you that there is no one size fits all to retirement. For some, they might have additional income they receive such as a pension or part time work they do in retirement. Others may have their homes paid off prior to retirement so they can reduce their monthly expenses. Both the Lending Tree study and the WSJ article do not mention the account type the savings are in. For example, if the assets are all in a traditional retirement account where all withdrawals are subject to ordinary income taxes, that is a lot different than if the assets are spread across different account types like Roth accounts or even taxable savings and investment accounts.

Your retirement lifestyle is going to be unique to you. Studies and articles like these give you a good idea of where you stand in relation to the averages, but your retirement dream might be a lot different than average. It is important to understand your specific needs and the best savings strategy for your individual goals. Instead of focusing on the dollar amount of a portfolio, focus on what income you will be able to generate once you retire. Now if you are thinking about retirement, make sure you check out this video where I cover 4 habits that can ruin your retirement, I’ll see you there.

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