Charles Schwab and Logica Research released a survey of 401k participants. Among the topics, What did people view as obstacles to their retirement? What percentage of income do people think they will receive from their 401k? How long do people think their retirement savings will last, How much do people think they will need to retire? Lastly, the importance of having a plan.
- 0:00 – Intro
- 0:30 – Survey details
- 0:49 – The obstacles to retirement
- 2:40 – How much of your retirement income will come from your 401(k)?
- 3:33 – How long will your retirement savings last?
- 6:16 – Do you really need $1.7 million to retire?
- 7:37 – The value of planning
- 9:52 – A new adventure: working with family.
- 12:30 – Our growing firm.
- 15:00 – Outro
Watch Now: Do You Need $1.7Million to Retire?
Obstacles to Retirement
According to the survey, 45% of respondents believed that Inflation was a major obstacle to retirement. The rising costs of living have been in focus lately. The truth: inflation is always a factor in our retirement plans. One of the best tools to maintain purchasing power is growth-oriented investments like stocks. Those growth-oriented assets often come with higher levels of volatility—which was also a perceived obstacle to retirement.
How much of your income will come from your 401?
The answer to this question is different for everyone and depends on multiple factors. Social Security will replace between 30-50% of your pre-retirement income. Fewer people have pensions from their employers. This means your retirement savings will fill in the gaps.
We see people who depend on their retirement savings for more than half of their retirement income. We also work with people who don’t use their retirement savings to generate any income (until they have to with required minimum distributions.) The answer for you is probably somewhere in between
How long do you think your retirement savings will last?
The average response from the respondents of this survey said they expect their retirement savings to last 23 years. This is a pretty good estimate.
According to the Social Security Administration, the average life expectancy for a 65-year-old male is 83 years old. The average life expectancy for a 65-year-old female is 85. Having your savings last 23 years, would—on average—be adequate.
But your savings may need to last longer.
How much will you need to retire?
The most surprising thing in this survey was the amount most people thought they would need to retire. The average amount was $1.7 million.
If you are in your twenties or thirties, this may be a good target for you. If you are planning to retire between the ages of 55 and 60, this also may be a good target.
In real life, most people retire with far less.
Determining “your number” is an important part of the retirement planning process.
The Real Value of Planning
Financial planning is a way to help you answer many of these questions (and more). It evaluates where you are and helps point you towards where you want to be. From this process, we can calculate how much of your income will come from your 401(k). We can estimate how long your savings will last. And we can also project how much you will need to retire.
But a financial plan is a snapshot in time, and this limits its value. The real value of planning comes from the ongoing guidance and course corrections. Making adjustments as your life changes helps you to create a confident path to the retirement you want.
Appearing in this video:
Michael Seese, CFP®
Mike has been a financial advisor for more than 26 years. He is located in Parkersburg WV.
Neal Watson, CFP®
Neal has been a financial planner since 1996. He is located in Marietta, OH