Coming Up Short?

This is the general warning from an article in the WSJ. Too many Americans will come up short in their retirement savings. One scary tidbit was that only 25% of Americans over age 55 have $250,000, or more, saved for retirement. The scary part is that people who live to age 90 will need $215,000 for medical expenses. That leaves $35,000 from to draw 5% from. Oops.

The article also talks at length about planning to need 70% of what you make now to live on and questions whether instead of 70% you should target replacing 85% of your income.

Advice like this is too broad. Plenty of people have a mortgage when they are younger. Whether the mortgage is paid off in retirement matters and would be a huge determinant as to how much of your income you need to replace. Some people need to drive a particular type of vehicle when they work, pay for it a particular way and replace it at a specific time interval. No car payment or a lower car payment could also affect income need in retirement.

The bigger point is to not rely on a generic number but to analyze your own situation to determine how much you need. If the number you come up with is too low you might want to reassess.

My wife and I have almost no expenses now. Really, all we pay for is utilities, groceries and various insurance premiums. Layer on top of that two trips per year.

I expect my expenses will increase in retirement due mostly to normal health costs. Also, we currently make no car payments but they way have lived so far we have a car payment about 1/3 of the time, we drive cars until they die, well close to it anyway.

I am often critical of brokers and bankers for trying to label customers as tab A or tab B and then fitting them into slot A or slot B. Don't label yourself in the same way.