How much do you need to retire? For some folks, the answer can be measured in millions. Others are convinced they can live on Social Security and a little savings.
Recently, the Transamerica Center for Retirement Studies asked 5,846 adults how much they would need to feel financially comfortable as they begin retirement.
Overall, workers believe they need a surprisingly modest amount of savings to be ready for their golden years. In fact, the median amount was $350,000, well below what many financial professionals recommend.
Although some workers expect to need more than $2 million, a far larger percentage say less than $1 million will do.
Here is how much today’s workers believe they will need in retirement:
- $2 million or more: 17% of workers say they will need this much
- $1 million to less than $2 million: 16%
- $500,000 to less than $1 million: 16%
- $100,000 to less than $500,000: 23%
- Less than $100,000: 29%
It would be nice to report that today’s workers reached their retirement savings estimates by sitting down and discussing the topic with a financial pro or crunching the numbers in detailed fashion.
However, 45% said they reached their number simply by taking a guess.
Less than one-quarter — 23% — said they used a retirement calculator or completed a worksheet when arriving at their answer.
The off-the-cuff nature of estimating retirement needs probably explains why the survey respondents’ estimates were so low. Such uneducated guessing likely does not bode well for their future, which may be more expensive than they imagine.
How to improve your mastery of money
Today’s workers clearly have a long way to go before they will be equipped to accurately assess retirement needs. In fact, just 31% of workers in the survey said they have a “great deal” or “quite a bit” of understanding of basic asset allocation principles.
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