$1 million is just not what it used to be…
$1 million has long been the default magic retirement savings goal for US citizens. Why? Who knows. But it is the one most people will say if you ask them what their goal is.
But, a new article in Fortune Magazine says that $3 million is the new magic number.
Why?
Because the cost of living has increased dramatically since that number became the benchmark.
Anyone older than 40 can tell you how much more expensive it is to live today than when they were first starting out as a young adult. And while it might be easy to put that in the same category as the “uphill both ways in a snow storm” story, it really is true.
So, what can you do?
Well, the first thing is to figure out what your goal number is.
Take a look at what your current cost of living is. Unless you know you have some major expenses that will be paid off or that you will be adding, you will most likely want to maintain your current lifestyle.
Then use one of the free calculators on google to find out what that number will be in X years when you want to retire. You can use 2% as a default average inflation rate.
Once you know how much your current lifestyle will be in X years you can multiple that number by the number of years you expect to live after retirement. This will give you an approximate goal number for your retirement savings.
Keep in mind that you may want to downsize your house. You could plan to keep the profit to use toward retirement. I would add paying off credit cards, student loans, etc, but if you want to travel the expense could be a wash.
There are a lot of options for saving.
One of the easiest is maximizing your 401(K) contributions to take full advantage of your employer’s match. Other than that, there are not many reasons to use a retirement-specific savings vehicle. Remember, you will be taxed no matter what you do. It is just a matter of whether it is now at a rate you know or in the future at a rate you do not know.
Other options are the stock market, bonds, real estate, insurance, annuities, and crypto, to name a few.
Do you research and decide what is best for you.
And, of course, please let me know if I can be of any assistance. I have just opened some new spots for my free First Step financial strategy calls and I would love to help you figure out your best first step down your path to your financial goals.