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I came across the following Kiplinger article recently:
https://www.kiplinger.com/retirement/social-security/minimum-savings-to-retire-by-state
It postulates that you would need to save a minimum of 1.6 M to retire comfortably in California, the third most expensive state in which to retire. There are a lot of unknowns in how they calculate this, but alarmingly the median savings of people 65-74 in $200,000 the average is $609,230. On social media sites, people ask if they can retire on social security alone. I know this is preaching to the choir, but what do people do if they fall short? Do you feel prepared to retire?
I agree, people must be retiring all the time without the golden nest egg that this form and other media suggest. It must be that way, if the median is $200,000, the average is meaningless. What I don’t see discussed is that half the people who save 1.6M saved too much. Actually more than that. It all depends on how old you live. The majority of people on this form are very risk adverse. Also many people on this form enjoyed their jobs. Great for them, but they are only about half of American workers.
For those of us who have to work, we are trying to figure out when we can retire. In this case, there is risk, the risk that you worked longer than you had to. It’s not as simple as income vs expenses, as a person can slowly withdraw their retirement savings. Again, for those who don’t mind working, what I’m saying doesn’t apply. For about half of Americans, it’s risk of running out of money vs the risk of running out of life.
By the time one runs out of money, they likely are too old to return to work. Though many people will not experience this as they will die first..For those who live longer then the average, it would be interesting to know what people do. I think most of them downsize their life until they are living in a trailer park.
Jacknak, great points. You can always earn more money but you can’t get more time. I’d like to retire before I get too tired to travel. I want to stay active in retirement.
To me, it’s a very simple answer: you need more income than expenses. Pensions, annuities, social security, other monthly streams of income, and investment proceeds would need to exceed your expenses. Each of those that a person or couple has is quantifiable and, when compared to expenses, would define when you have “enough” to retire. Paper and pen, spreadsheet, or packaged financial software can each do the math.
The great unknown is how the stock market and economy will do. People are telling me now is not a good time to retire given the uncertainty–tariffs, inflation. SS and so on. That’s unless you have a substantial pension.
What I find somewhat difficult is to find a retirement calculator that includes income from SS accounts, pensions, portfolio and then value them accordingly.
I did find one (that I can’t find now) that did take these incomes, increases, and estimated longevity into account. I remember it valued our total portfolio and fire earnings total at 2.3 million.
L H, You could use the funded ratio approach, explained by Wad Pfau in Retirement Planning Guidebook (2025 edition), Chapter 3. It involves totaling all your future spending (liabilities) (this requires you have a planned budget for retirement) (there is a category for “reserves” for “spending shocks”, e.g. LTC etc) and totaling future income (assets) (here you include SS accounts, pensions, portfolio, future employment earnings) for the duration of future years you wish to plan for. Then these are all expressed as present values for comparison to determine if you are adequately funded for retirement.
Here are some of my favorites:
Rich, Broke, or Dead: you can include SS, pensions, portfolio value and allocation, future expenses, etc. It also includes US average life expectancy so you can see the likelihood of your money running out as well as the likelihood you won’t be around to care.
FIRECalc: The interface is a little dated, but you can also model income, portfolio size, future expenses, etc.
cFIREsim: Also allows you to adjust inputs and model likelihood of success.
For an approach to how much to withdraw from your portfolio I really like:
TPAWPlanner: Total Portfolio Withdrawal and Allocation – developed by Ben Mathew over at Bogleheads. It’s pretty great.
VPW: Variable Percentage Withdrawal – developed by longinvest over at Bogleheads. The link takes you to a spreadsheet you can download. You enter a few numbers and it lets you know how much you can withdraw and what flexibility you might need to have if the markets crash.
Cheers!
Cecilia, thanks for the suggestions!
Do you know if the analysis assumes what a single person needs for retirement or for a couple? thx
Philip, I’m not sure. That’s a good point though
I don’t know the details of this analysis, but I think in general it doesn’t matter. How much one needs to have saved is based on household expenses. I think for couples, one thing that’s important to account for, and is sometimes overlooked, is changes in income (less SS/pension) and taxes when one of the partners dies.
Philip, in my opinion, the article is nothing but clickbait. It should come with a disclaimer; for entertainment purposes only. If someone is in their working years and planning for retirement, they need good financial software or a reputable person to help with the math. What do I want from retirement, what will it cost in future dollars, how much to save and how to invest to make it happen. Retiring will require a bunch of new calculations and decisions. No simple table can provide the answers.
Below I suggested that planning was easy. It may not be rocket science, but it was wrong for me to say that it’s simple.
Obviously if you have a pension that “magic number “ is much easier to achieve.
Do you or any HD readers know where I can find a retirement calculator that takes into account current portfolio, SS accounts, and income from pensions
Try Boldin. It’s not free but is a quite comprehensive Monte Carlo calculator. When I used it a few years ago it had a one month free trial. I performed the Monte Carlo then cancelled. Will use it again in the future rather than returning to the financial advisor we used to use.
As others have pointed out, if you fall short, working longer is an option. Relocation is another option. We have quite a few Californians moving into our area. Real estate is less costly as is gasoline and certain other expenses including taxes (sales, real estate, personal property tax, etc.). Some states don’t tax SS benefits, while some don’t tax other retirement benefits. However, one does have to do their homework. We moved to a state and realized a reduction in taxes and gasoline costs, etc. The decision was driven by health-related issues.
Norman, what part of the country are you in again? I lived on the East Coast and weather is a major consideration for me. I refuse to ever shovel snow again!
Most of the southern states have lower costs of living. We retired to Georgia from California. Not because of the cost of living but because our oldest son and grandkids are here. But the lower cost of living is a nice side benefit. Wouldn’t be our first choice. We lived in Colorado for 7 years and that is where my heart is. But my wife could no longer tolerate the snow.
We live in NH and I would rather deal with snow (huge decrease in total since I was growing up) than earthquakes, floods, forest fires, 100+ degree temperatures, and hurricanes.
It’s a cute article but at the end of the day, a resident of West Virginia with a boatload of debt may need more than a guy in Hawaii living in a paid off cottage underneath a volcano. Also, I was not able to find the amount that the average person retiring this year might expect to receive from SS; I’m pretty sure it’s more than the article’s table suggests.
I’m just sayin’, see Mark’s comment below and go from there.
I think financial education is so important. You’d be surprised how many educated people don’t know what a ROTH IRA is, never mind how to calculate how much money they’ll need in retirement.
It’s Roth IRA. Roth was a person.
The common assumption is that replacing 80% of working income is sufficient. So, if a person is earning $60,000 that’s $48,000. For most people SS will replace about 40% of income. That means half the goal is taken care of and the actual goal is to replace $24,000. That can be done with $600,000 or so.
The median salary for those employed full-time, was $66,986 in California in 2024. Forget retirement, a lot of younger people are living while working with related expenses on nearly what is said to be needed in retirement.
For maybe half the California population $1.6 million seems way too high.
Dick, is that your opinion?
I am meeting more and more older people who are renting and have not been able or willing to own a house. That would make me nervous–you cannot be sure your rent would increase dramatically in the future.
Very true, you can only be sure rent and everything else will increase.
I don’t know how most can afford to live in California at all, retired or not.
What you need to live on in retirement depends on what you lived on before, not some arbitrary number.
“What you need to live on in retirement depends on what you lived on before, not some arbitrary number.”
That first part assumes your retired life will be very much liked your working life. I think it’s much better to make an estimate of expenses in retirement, not say X% of what one was living on while working.
Agree it also doesn’t depend on an arbitrary number which this $1.6M seems to be.
I think a lot of people go back to work part time if they can. I see a lot of older people working in the stores these days. In our families, everyone paid off their house before they retired. Some cousins are still working full time in their mid-late 60s. Some of our relatives were able to be in subsidized elder apartments that were sliding scale. Quite a few of our older relatives ended up in Medicaid nursing homes. Chris
Well if I was a construction worker I know I certainly would not be able to wait until age 70 to retire. Even standing on your feet all day as a cashier at Safeway would be difficult.
It’s not difficult to work out: take your annual expenditure, deduct your Social Security payments, and then multiply that number by 25 to 30. If your number comes up short, then it’s a choice between a reduction in lifestyle or keep working until your savings meet your needs. Maybe not a popular message, but that’s the reality
Simple to do, but so many people don’t do it. I think the estimate for California is too low.
Most people fall short of the financial gurus advice. They make do, some live in poverty or nearly so with various forms of assistance. That’s why SS is so critical for majority of retirees.