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How Much i$ Enough (to Retire)? – Part 1 of 3


Recently, Charles Schwab & Co. asked investors how much money they thought would be adequate to fund their retirements. The consensus (we weren’t told whether this was an average or a median) was $1.7 Million. 

It should come as no surprise to anyone that very few people will ever accumulate that much money prior to retirement. This was confirmed by a Fidelity study from early 2019 that showed an average 401(k) balance of $195,000 for the age group 60 – 69 years. Younger people, as expected, had less.

We believe that the Schwab survey asked the wrong question. We would have asked how much annual income people believed they needed to be comfortable retiring. For years now, Van Wie Financial has been examining the retirement asset formula more thoroughly than simply looking at 401(k) balances. Not only are our results somewhat more optimistic, but they also suggest that society is in somewhat better condition than the hard and fast 401(k) numeric suggests.

The reason Americans accumulate retirement assets in 401(k)s, IRAs, etc. is to eventually monetize account balances into income streams for retirement years. We all have the same objective -- financial independence. Every individual determines their required income level without regard to other people’s objectives. Variables include age, marital status, geographic location, and lifestyle.

Averaging a need for $1.7 Million is the surest way to mislead Americans into believing they can never achieve a reasonably comfortable retirement lifestyle. Were this universally true, we’d be praising and reaffirming that number. Life is seldom so quantifiable, and this time is no exception. Determining your own personal financial independence level is, well, personal. 

Comprehensive Personal Financial Planning has developed into a complex array of variables, both controllable and otherwise. Examining your complex and individual situation is a requirement for success. Most people need to have some help along the way. In a nutshell, that is our day job.

Rather than discouraging people who are trying hard to do the right thing by planning a certain level of personal retirement income, we prefer to educate them on the various elements of wealth and how they intersect later on. It is usually more achievable than originally thought.

Next week we’ll introduce the concept of “Equivalent Net Worth,” which allows a person to customize his/her/their variables to arrive at financial independence.

Van Wie Financial is fee-only. For a reason.